1. These three appeals have been filed by revenue. Respondent Asha Industries have also filed three cross objections in this regard.
2. Ld. AR pointed out that the appellants are a declarant unit and have filed a refund claim under Rule 5 of the Cenvat Credit Rules. He pointed out that the appellants have availed cenvat credit though they are not registered as their clearances are below the threshold limit prescribed in law. Ld. AR argued that the appellants have not exported the goods under bond. He argued that the export under bond is primary requirement under Rule 5 which reads as under:-
Rule 5 of Cenvat Credit Rules, 2004 reads as under:-
Rule 5A manufacturer who clears a final product or an intermediate product for export without payment of duty under bond or letter of undertaking, or a service provider who provides an out service which is exported without payment of service tax shall be allowed refund of CENVAT credit as determined by the following formula subject to procedure, safeguards, conditions as limitations as may be specified by the Board by notification in the official Gazette.
He further argued that in terms of para 4 of Circular No. 323/39/97-CX dated 14.07.1997, the credit of duty paid on inputs used in the final products cleared for export under bond is also available under Rule 57F(13). The said para 4
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reads as under:-
Para 4 Further, the credit of duty paid on inputs used in the final products cleared for export under bond is also available under Rule 57F(13). The credit so taken by a manufacturer can be utilised towards the payment of duty on similar final products cleared for home consumption on payment of duty and where such adjustment is not possible, the credit can be refunded to him in accordance with the procedure prescribed by the Government.
3. He further pointed out as per para 5 of the said circular, the credit so availed by SSI units, simultaneously availing exemption under notification No. 16/97-CE (condition therein is similar to Notification No. 8/2003 and 8/2006 clarified vide Board's letter dated 01.06.2006) can either be utilised for payment of duty when the units start paying duty after crossing the limits of ` 100 lakhs (presently ` 150 lakhs) or the same can be refunded as per the provisions of MODVAT Rules. Further, all such units should maintain separate accounts right from raw materials stage to the final production stage, for export production as well as for home consumption production. Since the appellants in the instant case had not maintained separate accounts for export and home consumption, as required in terms of the above said circular, hence was not eligible for refund of Cenvat credit.
4. Ld. AR differentiated in the case of CCE vs. Kanak Agri Tech 2007 (216) ELT 726 relied upon by the Commissioner (Appeals) wherein the export was made under bond unlike the present case wherein export was not made under bond. He differentiated the decision of Tribunal in Accent Microtech Inds: 2007 (218) ELT 369 relied upon by the Commissioner (Appeals) on the ground that the issue is totally different. He also differentiated the decision of the Hon'ble High Court in Repro India Ltd. 2009 (235) ELT 614 relied upon by the Commissioner, on the ground that in the said case the unit was registered unit who had taken cenvat credit of duty paid on the inputs used in the manufacture of final products.
5. Ld. counsel for the respondents argued that Hon'ble High Court in Repro India Ltd. (supra) has ruled that cenvat credit is available in respect of inputs used in manufacture of final products being exported irrespective of the fact that the final product is otherwise exempted. He argued that it leads to the conclusion that credit is available even if the goods are unconditionally exempted. He specifically relied on para 8 and 9 of the said decision, which reads as under:-
8. The Cenvat credit is allowed in (sic) the duty paid on inputs to mitigate the effect of double taxation of levying duty on inputs as also on the final product. If, however, the exempted final product is exported it calls for a special relaxation/dispensation to make the goods of the country internationally competitive. As an illustration suppose a final product like tractor is otherwise exempted from excise duty even for domestic consumption and such tractors are exported. The various inputs like engines, etc., used in the tractor may have suffered excise duty. The intention is not to export taxes but only to export the goods. If the inputs like engine going into the manufacture of export commodity namely tractors are subject to excise duty, the Indian manufacturer of tractors becomes internationally uncompetitive. This appears to be the object behind the Government enacting special scheme to ensure that the duty is not levied even on inputs going to the export products. Rule 6(6)(v) has been consciously and expressly enacted with the specific objective to ensure that duty is not levied even on inputs going to the export products. This method of adjustment, both from the point of Government and the assessee is to allow the assessee to take Cenvat credit on the inputs used in the export products and allow the assessee himself to adjust it for payment of duty on other products. If the adjustment is not possible, Cenvat credit is refunded in cash. This appears to be the Scheme of Rule 5 of the Cenvat Credit Rules, 2004. With a view to achieve this object, the Central Government has specifically enacted Rule 6(6)(v) of the Cenvat Credit Rules, 2004 to the effect that the bar created by Rule 6(1) will not apply for goods exported. Considering the conscious and express provisions contained in Rule 6(6)(v) for exported goods, to deny the permission to export under bond and/or to levy 10% on the value of the exported goods under Rule 6(3)(b) on the footing that the printed books exempt and, therefore, attract Rule 6(1) would be incorrect and completely nullify and frustrate Rule 6(6)(v).
9. We may also consider the various clauses of Rule 6(6) which would indicate that they relate to goods which are wholly exempt from duty. Rule 6(6)(i) relates to supply to SEZ. These are wholly exempted from duty vide Notification dated 19th October, 2001 and notification dated 22nd July, 2003. Rule 6(6)(ii) relates to supply of goods to Export Oriented Units. These are wholly exempt by Notification dated 31st March, 2003. Rule 6(6)(iii) relates to goods supplied to a unit located in Electronic Hardware Technology Park or Software Technology Park. Such supplies are exempt from duty by Notification dated 31st March, 2003. Rule 6(6)(iv) relates to supplies to United Nations or an international organisation for their official use. These are exempt by Notification No. 108/95. Rule 6(6)(v) relates to export under bond. Rule 6(6)(vi) relates to gold or silver arising during refining of copper. These are exempt from payment of duty by Notification No. 5/2006-C.E., dated 1st March, 2006. It would thus be clear that all the clauses of Rule 6(6) are enacted only to deal with the situation when the final products are exempt from payment of duty. If a final product is not exempted from duty, Rule 6(1) is not attracted at all and hence Rule 6(6) is unnecessary. Rule 6(6) is precisely needed only when the final products are exempt from payment of duty. In this context the Revenue itself has accepted that under the provisions of Cenvat Credit Rules, 2002 there were provisions for removal of exempted goods under bond but the same was not available with effect from 9th September, 2004 under Cenvat Credit Rules, 2004.
We may reproduce Rule 6(5) of the Cenvat Credit Rules, 2002 which reads as follows:-
(5) The provisions of sub-rule (1), sub-rule (2), sub-rule (3) and sub-rule(4) shall not be applicable in case the exempted goods are either-
(i) cleared to a unit in a free trade zone; or
(ii) cleared to a unit in a special economic zone; or
(iii) cleared to a hundred per cent export oriented undertaking; or
(iv) cleared to a unit in an Electronic Hardware Technology Park or Software Technology Park; or
(v) supplied to the United Nations or an international organization for their official use or supplied to projects funded by them, on which exemption of duty is available under notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 108/95-CentraI Excise, dated the 28th August, 1995, number GSR 602(E) dated the 28th August, 1995; or
(vi) cleared for export under bond in terms of the provisions of the Central Excise Rules, 2002. We may reproduce Rule 6(6) of the Cenvat Credit Rules, 2002, which read as under:-
The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case the excisable goods removed without payment of duty are either-
(i) cleared to a unit in a special economic zone; or
(ii) cleared to a hundred per cent export oriented undertaking; or
(iii) cleared to a unit in an Electronic Hardware Technology Park or Software Technology Park; or
(iv) supplied to the United Nations or an international organization for their official use or supplied to projects funded by them, on which exemption of duty is available under notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 108/95-Central Excise, dated the 28th August, 1995 number G.S.R.602(E) dated the 28th August, 1995; or
(v) cleared for export under the items of the provisions of the Central Excise Rules, 2002; or
(vi) gold or silver falling within Chapter 71 of the said First Schedule, arising in the course of manufacture of copper or zinc by smelting.
A perusal of the aforesaid Rules would clearly show that sub-rule (i) to (vi) are identical and the difference in Rule 6(6) of the Cenvat Credit Rules, 2004 and Rule 6(5) of the Cenvat Credit Rules, 2002 is not relevant for the purpose of the present case. Rule 6(1), 6(2), 6(3) and 6(4) of the Cenvat Credit Rules under Cenvat Credit Rules, 2002 as well as under the Cenvat Credit Rules, 2004 remains the same. As noted earlier the object and purpose of Rule 6(6) of Cenvat Credit Rules, 2004 is to promote the policy of the Government that the benefit of duty paid on input is available as credit in respect of certain exempted goods as well as the exempted goods exported under bond. The minor change in the wordings of Rule 6(6) of the Cenvat Credit Rules, 2004 by using the term excisable goods instead of exempted goods is that the term exempted goods may not cover the dutiable goods which are exported under bond. Therefore, in order to widen and cover both dutiable and exempted goods exported under bond, Rule 6(6) of Cenvat Credit Rules, 2004 uses the expression excisable goods. As an illustration, if a car which is dutiable is exported under bond without payment of duty there may be doubt as to whether credit on the inputs will be available, since the car is cleared without payment of duty under Rule 6(5) of Cenvat Credit Rules, 2002. It could be argued that it covers only the exempted goods exported and not dutiable goods exported. In order to cover such a situation also, Rule 6(6) of Cenvat Credit Rules, 2004 used the expression excisable goods which is wider to include both dutiable as well as exempted goods.
6. Ld. Counsel for the respondent further relied on the decision in CCE vs. Drish Shoes Ltd. : 2010 (254) ELT 417 (HP) and argued that the Hon'ble High Court has ruled that an assessee manufacturing goods chargeable to nil rate of duty is eligible to avail cenvat credit under the exception clause to Rule 6(1) as contained in Cenvat Credit Rules and 6(6) of Cenvat Credit Rules, 2004, if the goods are exported.
7. I have gone through rival submissions. I find that the appellants are not a registered unit. I also find that there is no requirement for being registered to avail benefit under provisions of Cenvat Credit Rules. The full argument of the Revenue is that the appellants had not exported the goods under bond which is a requirement of Rule 5 of Cenvat Credit Rules, 2004. It is seen that the goods manufactured by the appellants are totally exempted and therefore export of same under bond serves no purpose. Bond is a requirement in cases where the products are chargeable to duty and in case of failure to export, duty liability thereon can be enforced through bond against the exporter. In the instant case, it is not in dispute that the goods manufactured by the appellants were exempted and not chargeable to duty. It is also not in dispute the goods were being exported. The Hon'ble High Court in Repro India Ltd. (supra) has held that the appellants could have availed cenvat credit in terms of Rule 6(6)(v) of Cenvat Credit Rules, when exempted goods are exported under bond.
8. While is it a fact that the goods were not exported under bond, but the fact of export of goods has not been challenged. The intention of Rule 5 of Cenvat Credit Rules is to ensure that the tax and duties are not exported. Keeping the spirit of the Rule in mind, I find that the refund of cenvat credit should be allowed even in circumstances when exports were not made under bond, although it is a requirement of Rule 5 as well as Rule 6(6)(v) of Cenvat Credit Rules. This is more so for the reason that the goods exported by the appellants are fully exempt and export under bond would serve no purpose. Even if the exempted goods cleared for export under bond are not exported no liability arises. The bond in those circumstances serves no purpose.
9. In view of the above, the appeals of revenue are dismissed. Cross objections are also disposed of