Case Law Details
Rashtriya Chemicals Fertilizers Ltd. Vs Commissioner of Central Tax (CESTAT Hyderabad)
In this case, Rashtriya Chemicals Fertilizers Ltd. appealed against Order-in-Appeal No.31/2011 dated 17.08.2011, concerning their entitlement to exemption notifications 01/2011-CE or 02/2011-CE for the import of Muriate of Potash. The dispute centered on whether they could claim the exemption due to the condition of not availing CENVAT credit.
The Revenue argued that without manufacturing, it was impossible to verify CENVAT credit, thus disallowing the exemption. However, the appellant contended that being an importer from outside India, they couldn’t avail CENVAT credit anyway, as the rules don’t apply beyond Indian borders.
The CESTAT Hyderabad referred to precedent, including the decision by the Supreme Court in Enterprises International Ltd. vs. Commissioner, and SRF Ltd. vs. Commissioner, determining that those outside India couldn’t avail CENVAT credit. Therefore, the appellant was entitled to the exemption notifications for their imports.
Consequently, the impugned orders were set aside, and the appeals were allowed.
FULL TEXT OF THE CESTAT HYDERABAD ORDER
Upon hearing, we find that the issue is already covered by precedent decision, accordingly taken up for final hearing with consent of both the parties.
2. These appeals have been filed against Order-in-Appeal No.31/2011 dated 17.08.2011.
3. The issue involved in these appeals is whether the appellant is entitled for the benefit of exemption notification 01/2011-CE or 02/2011-CE for the fertilizer viz., Muriate of Potash imported by them. When goods are imported into the country they are liable to (a) Basic Customs Duty as per the Customs Tariff read with any applicable exemption notifications; and (b) Additional Duty of Customs equivalent to Central Excise Duty leviable on similar products if manufactured in India read with any applicable exemption notifications. While calculating the additional duty of customs the Central Excise Tariff has to be referred to along with any exemption notifications available for additional duty of customs and also any Central Excise exemption notifications available. Exemption notifications are of two types i.e., either conditional or unconditional. Exemption notifications, being an exception to the general rule have to be interpreted strictly against the person claiming the exemption notification.
4. In this case the appellant imported ‘Muriate of Potash’ and claimed the aforesaid Central Excise exemption notifications which were conditional notifications. The condition therein is that no CENVAT credit should have been availed in the manufacture of the goods. It is the case of the revenue that the appellant has not manufactured but has imported these goods and hence it is impossible to verify whether any CENVAT credit has been availed or not and therefore no exemption notification is available to them. It is the case of the appellant that the manufacturer of the product is located outside India and hence it is impossible for them to avail CENVAT credit. By no stretch of imagination, can it be alleged that CENVAT credit has been availed. Therefore, as far as imports are concerned, this condition is deemed to have been met.
5. Learned Counsel for the appellant submits that on an identical case the Hon’ble Supreme Court in the case of Enterprises International Ltd., [2017 (346) ELT A130 (SC)] held that the condition related to non availment of CENVAT credit does not bar the benefit of the Central Excise exemption notifications while calculating additional duty of customs on imports.
6. Learned Authorised Representative for Revenue reiterates the findings of the Lower Authority and asserts that unless it can be shown that the conditions have been fulfilled the appellant is not entitled to the benefit of the conditional exemption notification. The burden of proving that the condition has been met rests on the appellant and they have not discharged this burden. Therefore, the appeals may be rejected.
7. We have considered the arguments on both sides and perused the records. It is true that any exemption notification must be strictly construed against the assessee who is claiming the benefit of the same. In this case, the only point of dispute is whether or not the CENVAT credit has been availed for the goods in question. It is not in dispute that the goods have been imported and therefore were manufactured outside India. The CENVAT Credit Rules, 2004 or CENVAT Credit Rules, 2002 are framed under the Central Excise Act, 1944. This Act applies to the whole of India but not beyond. When the Central Excise Act itself does not extend outside India, neither will the CENVAT Credit Rules. Therefore, it is impossible for anyone outside India to avail the benefit of CENVAT credit. Therefore, in respect of imports, it is impossible that the condition of CENVAT credit not being availed is not fulfilled. This has been decided by the Hon’ble Apex Court in the case of SRF Ltd., [2015 (318) ELT 607 (SC)]. We respectfully follow the ratio of the judgment of the Hon’ble Apex Court and hold that the appellant is entitled to the benefit of the exemption notifications 01/2011 & 02/2011-CE in respect of their imports.
8. In view of the above, the impugned orders are set aside and the appeals are allowed.
9. Miscellaneous Applications also stands disposed of.
(Order dictated and pronounced in open court)
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