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Areva T & D India Ltd V/S Commissioner of Central Excise (LTU), Chennai

    Appeal No. E/9/2010 (Arising out of Order-in-Appeal No. 53/2009 dt. 19.10.2009 passed by the Commissioner of Central Excise & Service Tax (Appeals), LTU Chennai) and Final Order No. 42228/2017

    Decided On, 27 September 2017

    At, Customs Excise Service Tax Appellate Tribunal South Zonal Bench At Chennai

    By, THE HONORABLE JUSTICE: SULEKHA BEEVI C.S.
    By, MEMBER AND THE HONORABLE JUSTICE: MADHU MOHAN DAMODHAR
    By, MEMBER

    For Petitioner: Joseph Prabhakar, Advocate And For Respondents: K.P. Muralidharan, AC (AR)



Judgment Text


1. The facts of the case are that appellant had imported inputs such as PCB Assembly, Friction Pad, Moulded contact block, Case Assembly and Ethernet PCB etc., for use in the manufacture of Relays by availing concessional rate of customs duty under Notification No. 36/96-Cus (N.T.) dated 23.07.96 as amended & Notification No. 25/09-Cus dated 28.02.99 by following the procedure prescribed under Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. The appellant had availed CENVAT credit of the CVD paid on these imported inputs. During the period May 2007 to December 2007, the appellant had exported some of the above inputs

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'as such', without using the inputs for the manufacture of final products, namely, Relays. Department took the view that appellants were not eligible to avail cenvat credit in respect of the imported inputs which had been re-exported. Accordingly, show cause notice dt. 13.05.2008 was issued to them inter alia proposing demand of an amount of Rs. 22,46,129/- along with interest liability and imposition of penalty under Rule 15 of CCR 2004. In adjudication, original authority vide order dt. 26.12.2008 confirmed the said amount and also imposed penalty of Rs. 5 lakhs under Rule 15 ibid. In appeal, Commissioner (Appeals) vide impugned order dt. 19.10.2009 upheld the order of the original authority in totality. Hence this appeal.

2. Today, when the matter came up for hearing, on behalf of the appellant, Ld. Counsel Shri Joseph Prabhakar made oral submissions which can be summarized as under:

(i) Substantial portion of the imported materials have been used in the manufacture of relays, however for certain reasons, balance materials could not be so used.

(ii) Hence to comply with the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 (hereinafter referred to as CIGCRDMEG Rules), the appellant had re-exported the imported materials thereby reducing the obligation to that extent.

(iii) Appellant had therefore sought to comply with the requirements thrust upon them vide Rule 7 of the said CIGCRDMEG Rules.

(iv) Also at the time of re-export of the said impugned gods, they made reference to the Customs Notification No. 25/99-Cus. dt. 28.2.99 under which the goods had originally been imported, as also rules in order to ensure that they were not required to pay duty forgone at the time of import due to the said exemption.

(v) They rely upon the ratio of the following judgments:

(a) Zydex Industries Vs. CCE Vadodara 2007 (219) ELT 602(Tri.-Ahmd.)

(b) MRF Ltd. Vs. CCE & ST LTU Chennai : 2016 (337) ELT 583 (Tri.-Chennai)

3. On the other hand, Ld. A.R. Shri K.P. Muralidharan draws our attention to the definition of "input" in Rule 2(k) of Cenvat Credit Rules, 2004 and the provisions relating to removal "as such" of the inputs in Rule 3(5) of CCR 2004 relied upon by the Commissioner (Appeals) in the impugned order, based on which the said authority has correctly concluded that "as the balance materials were not able to be used in the manufacture of Relays, the same cannot be construed as 'inputs' as per the above definition". Ld. A.R. draws attention to Commissioner's finding that "the 'inputs' have to be used only in the manufacture of final products". Accordingly, as the material has ceased to be inputs amount equal to the credit availed has to be paid pack when cleared "as such", as they are not entitled for the credit. He also placed reliance on the ratio of the Tribunal decision in the case of Ford India Pvt. Ltd. Vs. CCE Chennai : 2007 (214) ELT 40 (Tri.-Chennai)

4. Heard both sides and have gone through the facts. What is not in dispute is that the imported inputs which had not been used in the manufacture of Relays, for various reasons, have been re-exported. It is not the case that, pursuant to such re-export, appellants have claimed any drawback in respect of duties suffered on the re-exported product or, for that matter, any export benefit thereon. From the facts on record, we find that it appears that they have not claimed even any refund or drawback in respect of the concession rate of customs duty initially paid on the imported inputs.

5. In our view, once the imported inputs have been re-exported, this would bring about a legal position as if the said goods had not been imported at all. Appellant also complied with all the provisions of the CIGCRDMEG Rules while effecting re-export of the impugned goods.

6. We are of the considered opinion that if the situation had been that the appellant had claimed drawback of the duty suffered on the imported inputs, including the additional duty of customs of which cenvat credit had been availed, there would have been definitely a requirement for reversing the cenvat credit since that would otherwise create an unintended doubt benefit. By the same token, when the appellants have not claimed such refund or drawback of the duties suffered post-re-export, it would not be just and fair to deny the cenvat credit in respect of the additional duty of customs, which they have already suffered. This is precisely the intention of the Cenvat Credit scheme, that is to allow availment of credit of duty to the extent that has been suffered by the assessee. By denying the availment of cenvat credit on the CVD suffered appellant is being put to put to unintended double loss.

7. We also find that the identical situation had been addressed in the two Tribunal decisions relied upon by the ld. Advocate. In MRF Ltd. (supra), the appellant therein had similarly re-exported inputs which was found to be defective and unusable. The question that came up was whether the appellant was required to pay an amount equal to the credit availed on such inputs as per Rule 3(5) of the CCR 2004 as argued by the lower appellate authority and which has been relied upon by the Ld. A.R., The Tribunal held that as the inputs have been re-exported, the benefit of drawback for re-export is available under Section 74 and relying on the ratio of decision of Zydex Industries case also, cited by the ld. Advocate, demand of availment of cenvat credit was held as incorrect. We do note that these Tribunal decisions are Single Bench decisions. Nonetheless, they are directly on the issue. It is also confirmed by the ld. Advocate that no appeals have been against these decisions.

8. In the light of discussions herein above and also following the ratio of the Tribunal decision in the case of MRF Ltd. and Zydex Industries (supra), we find that the impugned order cannot be sustained and will have to be set aside, which we hereby do. Appeal is allowed with consequential relief, if any, as per law
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