Court :
Tripura High Court
Brief :
The Hon'ble Tripura High Court in Union of India v. M/S. Dharampal Satyapal Ltd. [Central Excise Appeal No.01/2019 and Central Excise Appeal No.02/2019, dated March 22, 2021] upheld the judgment passed by the CESTAT, Kolkata allowing the assessee to avail the benefit of notification granting conditional exemption from the of the duties of excise/ other duties and dismissed the appeal filed by the Revenue Department. Held that, the exemption notification cannot be seen as a notification granting unconditional exemption from payment of duties.
Citation :
Central Excise Appeal No.01/2019 and Central Excise Appeal No.02/2019, dated March 22, 2021
The Hon'ble Tripura High Court in Union of India v. M/S. Dharampal Satyapal Ltd. [Central Excise Appeal No.01/2019 and Central Excise Appeal No.02/2019, dated March 22, 2021] upheld the judgment passed by the CESTAT, Kolkata allowing the assessee to avail the benefit of notification granting conditional exemption from the of the duties of excise/ other duties and dismissed the appeal filed by the Revenue Department. Held that, the exemption notification cannot be seen as a notification granting unconditional exemption from payment of duties.
M/S. Dharampal Satyapal Ltd. ('the Respondent') is a Company engaged in the manufacture of zarda, a scented tobacco, which falls under Chapter 24 of Central Excise Tariff Act, 2005 ('Central Excise Tariff Act') under Tariff Sub Heading 2403-99-30. The Respondent availed the benefit vide Notification No. 8/2004-CE, dated January 21, 2004 ('Exemption Notification') that granted exemption from the whole of the duties of excise leviable under Central Excise Tariff Act and other duties under other fiscal statutes on all goods falling under various sub-headings, subject to the condition that an amount equal to the sum of basic duty, special excise duty, additional excise duty and other duties which were exempt would be utilized by the manufacturer only for specified investments. The Respondent claimed CENVAT credit on the inputs utilized for manufacture of the final product.
The Adjudicating Authority issued a Show Cause Notice ('SCN') calling upon the Respondent as to why the CENVAT credit to the tune of INR 3.48 Crores availed by the Respondent on inputs and capital goods for the period from March 01, 2005 to September 30, 2005 should not be reversed or recovered, on the ground that the Respondent’s unit was exempt from payment of the duties of excise and other duties and on the basic principle of claiming CENVAT credit since the final product was not dutiable, CENVAT credit would not be available on the raw material and inputs utilized for manufacture of this final product and demands were raised for recoveries of additional duty of excise and other duties on the CENVAT credit availed by the Respondent and also proposed to impose penalty. Further, asked for recovery/reversal of CENVAT credit to the tune of INR 4.25 Crores with penalty for the period between October 01, 2005 to March 31, 2006 and later periods.
Subsequently, the Respondent filed reply to the SCNs.
The Commissioner of the Central Excise, Shillong ('the Appellant') passed an order on September 28, 2007 and confirmed the demands as per the SCN and imposed a matching penalty of INR 7.80 Crores on the ground that the Respondent had wrongly availed the CENVAT credit which must be reversed or recovered with penalty.
Consequently, the Respondent carried the matter in CESTAT, Kolkata filing separate appeals for different assessment periods that were consolidated and allowed by the Tribunal by the common Final Order dated July 17, 2018 ('Impugned Order'). Being aggrieved by the Impugned Order the Revenue has filed this appeal.
Whether the CESTAT was right in giving benefit of conditional Exemption Notifications in favour of the Respondent, ignoring the contention of the Respondents that the final product being exempted from payment of basic duties, the Respondent was not entitled to claim the benefit?
The Hon’ble Tripura High Court in Central Excise Appeal No.01/2019 and Central Excise Appeal No.02/2019, dated March 22, 2021 held as under:
'(d) "exempted goods" means excisable goods which are exempt from the whole of the duty of excise leviable thereon, and includes goods which are chargeable to "Nil" rate of duty goods in respect of which the benefit of an exemption under Notification No. 1/2011-CE, dated the 1st March, 2011 or under entries at serial numbers 67 and 128 of Notification No. 12/2012-CE, dated the 17th March, 2012 is availed'
'(A) the exemption under this notification shall be available only in respect of a unit which,-
(B) an amount equal to the sum of basic excise duty, special excise duty, additional excise duty and National Calamity Contingent duty, payable, but for the exemption in this notification, shall be utilised by the manufacturer only for investment in,-
(C) the investment in terms of condition (B) shall be made in the following manner, namely:-
(D) the manufacturer shall,-
(E) if the Committee referred to in condition (D) is satisfied that the investment as specified in condition (B), has been made, it shall issue a certificate to this effect to the manufacturer within a period of one month from the receipt of the details as referred to in condition (D), and on the issuance of which, the liability of the manufacturer shall stand discharged to the extent of investments so certified;
(EA) if the manufacturer fails to make the deposit or does not invest the amount specified in condition (B), within the stipulated period and in the manner, then, the duty which is equivalent to the amount not so deposited or invested shall be recoverable from the manufacture along with interest thereon at the rate specified under section 11AB of the Central Excise Act, 1944, and without prejudice to any action that may be taken under the provisions of the said Act or any other law for the time being in force, by forfeiture of amount in the said escrow account.
(F) the investment made under this notification shall not be allowed to be withdrawn before the expiry of ten years from the date on which the investment is made except in a case where the investment withdrawn is reinvested in the same manner as specified in this notification, in any one of the States mentioned in condition (A):
Provided that if the investment made under this notification is withdrawn before the expiry of ten years and is not reinvested as mentioned above, the duty which is equal to the amount so withdrawn and not so reinvested, shall be paid by the manufacturer on the date on which the investment is withdrawn.
Provided that for the goods cleared on or before 28th February, 2007 and in respect of which the exemption has already been availed of, the conditions specified in this notification shall continue to apply.'