Scrips Utilised for Debiting Duty in availing Exemption Notification cannot be considered as Exempted Goods: CESTAT [Read Order]

The Mumbai bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that scrips utilised for debiting duty in availing exemption notification cannot be considered as exempted goods.

Scania Commercial Vehicles India Private Limited, the appellants are engaged in the manufacture of tipper trucks and AC buses falling under Chapter 87 of the Central Excise Tariff Act, 1985. They availed CENVAT credit on inputs, capital goods and Service Tax paid on input services used in the manufacture of finished products.

The appellant manufactured and cleared 131 Nos. of tipper trucks to one M/s. VPR Mining Infrastructures (P) Ltd., Hyderabad, a holder of SFIS ( Served from India Scheme ) certificate without payment of duty by claiming exemption under Notification No.34/2006-CE dated 14.06.2006 as amended vide Notification No.15/2013-CE dated 18.04.2013. Alleging that the appellant had cleared exempted goods without following the procedures laid down under Rule 6 of CENVAT Credit Rules, 2004, they were issued with a show-cause notice on 08.09.2015 for recovery of 6% of the value of the exempted goods amounting to Rs.5,38,09,560/- with interest and penalty. On adjudication, the demand was confirmed with interest and penalty.

It was submitted that they have paid excise duty by using the scrips issued under the SFIS Scheme in terms of Notification No.34/2006-CE dated 14.06.2006 as amended. She contended that the clearances made by discharging duty by utilising the scrips issued under the SFIS certificate do not amount to the goods exempted from payment of duty. Thus, there was no need on the part of the appellant to maintain a separate account for dutiable and exempted input/input services as alleged by the department.

She has argued that the duty paid by way of SFIS scrips is to be treated as duty and the goods cleared are like duty-paid goods. It cannot be considered as exempted goods for Rule 6 of the CENVAT Credit Rules, 2004.

She has submitted that as per the definition of Rule 2(d) of CENVAT Credit Rules, 2004 which defines ‘exempted goods’ as excisable goods which are exempt from the whole of the duty of excise leviable thereon. In the present case, since the appellants are discharging duty by way of debit of scrips, therefore, the goods manufactured by them cannot be considered as exempted goods under the said definition. 

As per Circular No.973/7/2013-CX dated 4.9.2013 issued by the Board, it was clarified that scrip holders are permitted to avail CENVAT credit of the duties paid by way of debiting the scrip. It was clarified that such debit of duty in these scrips be treated as payment of duty to determine the applicability of Rule 6 of CENVAT Credit Rules, 2004. 

The Gujarat High Court in the case of Commissioner vs. Voltamp Transformers Ltd. case it was held observed that “the CBEC specifically mentioned the conditions that have to be performed by the jurisdictional Central Excise Officer of the assessees from where goods are cleared under SFIS. The CBEC circular also very specifically clarifies that the original certificate has to be produced before the jurisdictional Central Excise Officer for “debiting the duties of excise leviable on the goods.” The wordings of notification and subsequent CBEC Circular would make it clear that the duty liability which has been debited in the SFIS scrip, would amount to discharge of duty liability and not amounting to exemption, as was proposed by Revenue.”

A two-member bench comprising Dr. D. M. Misra, Member (Judicial) and Mr. Pullela Nageswara Rao, Member (Technical) held that “in the clearance of 131 Nos. of tipper trucks, the scrips utilised for debiting the duty in availing exemption Notification No.34/2006-CE dated 14.06.2006 as amended vide Notification No.15/2013-CE dated 18.04.2013, would not be considered as exempted goods; hence, Rule 6 of CENVAT Credit Rules, 2004 cannot be attracted.”

 The CESTAT set aside the impugned order and allowed the appeal.

To Read the full text of the Order CLICK HERE

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