Case Law Details
Bodal Chemicals Ltd Vs C.C.E. & S.T. (CESTAT Ahmedabad)
In the case of Bodal Chemicals Ltd vs. C.C.E. & S.T. (CESTAT Ahmedabad), a critical issue regarding the payment of Cenvat Credit on inputs used in exempted goods under Rule 6(3)A of the Cenvat Credit Rules (CCR) was brought before the CESTAT (Customs, Excise, and Service Tax Appellate Tribunal) Ahmedabad. The central question was whether the appellant was required to reverse the proportionate Cenvat credit on inputs used in the production of Sulphuric Acid cleared under exemption Notification No. 4/2006-CE.
Background of the Case
The core issue revolved around the liability of the appellant, Bodal Chemicals Ltd, to reverse the proportionate Cenvat credit on inputs used in the manufacture of Sulphuric Acid, which was cleared under exemption Notification No. 4/2006-CE dated 01.03.2006 (Sr. No. 32) at a nil rate of duty. According to the department’s argument, as Sulphuric Acid fell under the exemption category, Rule 6(3)A mandated that the appellant should pay an equal amount of Cenvat credit on the inputs used in such exempted goods.
Appellant’s Defense
The appellant, represented by Shri N. K. Tiwari, contended that the goods (Sulphuric Acid) were cleared to various fertilizer units in compliance with condition No. 2 of the said notification. This condition stipulated that the appellant should follow the procedure laid down in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001. Therefore, the appellant argued that since the goods were not exempted under this procedure, they should not be considered exempted goods. Consequently, the demand for Cenvat credit reversal was not valid.
To support their argument, the appellant cited various judgments, including:
- Dharamsi Morarji Chemical Co. Ltd. vs. Commr. of C.Ex., Raigad 2010 (255) E.L.T. 314 (Tri. – Mumbai)
- CCE Vapi vs. Advance Surfactants India Ltd. 2008 (88) RLT 275 (CESTAT- Ahmedabad)
- Kesoram Rayon vs. CCE Kolkata – IV 2007 (83) RLT 397 (CESTAT-Kolkata)
- CCE vs. Gul Jag Industries Ltd. 2007 (11) TMI 623- CESTAT New Delhi
- Commissioner of Central Excise, Madurai vs. DCW Ltd. 2009 (234) E.L.T. 163 (Tri- Chennai)
- Commissioner of C.Ex. Nagpur vs. Ballarpur Industries Ltd. 2007 (215) E.L.T. 489 (S.C.)
- Aureola Chemicals Ltd. vs. Commis. Of Central Excise, Indore 2004 (175) E.L.T. 148 (Tri.- Delhi)
Revenue’s Stand
On the other hand, Shri P. Tripathi, Learned Superintendent (AR) representing the revenue, reiterated the findings of the impugned order. He argued that Rule 6(3) did not provide any exception for exemption based on certain conditions. Moreover, he pointed out that the judgments cited by the appellant were not directly applicable, as they were related to different rules or periods when the definition of exempted goods was not under Rule 2(D)(d) of the Cenvat Credit Rules, 2004.
CESTAT’s Decision
After careful consideration of both sides’ arguments and a review of the records, CESTAT Ahmedabad provided its preliminary perspective. They concurred with the learned AR’s view that the judgments cited by the appellant were either related to the erstwhile Rule 57 CC of the Central Excise Rules, 1944, or pertained to a period when the definition of exempted goods had not yet been incorporated into Rule 2(D)(d) of the Cenvat Credit Rules, 2004.
As per the definition of exempted goods in Rule 2(D)(d), goods qualify as exempted if they not only bear exemption through notification but also have a ‘nil’ rate of duty. In light of this definition, CESTAT’s prima facie view was that Rule 6(3) applied even in cases like this. However, they noted that one of the judgments, Dharamsi Morarji Chemical Co. Ltd., was pending before the Hon’ble Supreme Court. Therefore, in the interest of justice, CESTAT Ahmedabad remanded the matter to the Adjudicating Authority. They instructed the Adjudicating Authority to pass a fresh order only after the Hon’ble Supreme Court delivered its judgment in the Dharamsi Morarji Chemical Co. Ltd. case.
Conclusion
The Bodal Chemicals Ltd vs. C.C.E. & S.T. (CESTAT Ahmedabad) case brings to the forefront the complexities surrounding Cenvat credit on inputs used in exempted goods. While the CESTAT provided a preliminary view, the final decision awaits the outcome of the Dharamsi Morarji Chemical Co. Ltd. case before the Supreme Court. This case highlights the dynamic nature of tax regulations and the need for businesses to stay informed about ongoing litigation that can impact their tax liabilities. Businesses should keep a close watch on such cases and seek expert guidance to ensure compliance with changing tax laws and interpretations.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
1. The issue involved in the present case is that whether the appellant is liable to reverse the proportionate Cenvat credit of inputs used and attributed to Sulphuric Acid cleared under exemption Notification No. 4/2006-CE dated 01.03.2006 (Sr. No. 32) on nil rate of duty. The Case of the department is that since the Sulphuric Acid has been cleared under exemption, in terms of rule 6(3)A, the appellant is liable to pay equal amount of Cenvat credit on the inputs used in such exempted goods.
2. Shri N. K. Tiwari, Learned Consultant appearing on behalf of the appellant submits that the clearance of goods i.e. Sulphuric Acid to various fertilizers unit was made by following the conditions No. 2 of the said notification whereby, the appellant have cleared the goods by following the procedure laid down in Central Excise(Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods)Rules, 2001. As per this condition the goods per se is not exempted goods which is cleared under bond under the said procedure. Therefore, the same is not exempted goods and consequently the demand of Cenvat credit is not sustainable. He placed Reliance on the following judgments:
- DharamsiMorarji chemical Co. Ltd. Vs. Commr. of C.Ex., Raigad 2010 (255) E.L.T. 314 (Tri. – Mumbai)
- CCE Vapi Vs. Advance Surfactants India Ltd. 2008 (88) RLT 275 (CESTAT- Ahmedabad)
- Kesoram Rayon Vs. CCE Kolkata –IV 2007 (83) RLT 397 (CESTAT-Klo.)
- CCE Vs. GulJag Industries Ltd. 2007 (11) TMI 623- CESTAT New Delhi
- Commissioner of Central Excise, Madurai Vs. DCW Ltd. 2009 (234) E.L.T. 163 (Tri- Chennai)
- Commissioner of C.Ex. Nagpur Vs. Ballarpur Industries Ltd. 2007 (215) E.L.T. 489 (S.C.)
- Aureola Chemicals Ltd. Vs. Commis. Of Central Excise, Indore 2004 (175) E.L.T. 148 (Tri.- Del.)
3. Shri P.Tripathi, Learned Superintendent(AR) appearing on behalf of the revenue reiterates the finding of the impugned order. He submits that as per Rule 6(3), there is no exception provided that exemption based on certain condition is excluded from the provision of the Rule 6(3). As regard the judgment relied upon by the appellant he submits that all the judgments are related to either erstwhile Rule 57 CC of Central Excise Rules, 1944 or for the period when the definition of exempted goods was not brought under statue in rule 2(D)(d) of Cenvat Credit Rules, 2004, therefore, the judgments are not directly applicable.
4. We have carefully considered the submission made by both the sides and perused the records. We prima facie agree with the learned AR that the judgments relied upon by the Learned Counsel are either in relation to erstwhile Rule 57 CC Central Excise Rules, 1944 or for the period during which the definition of exempted goods was not available. As per the definition of exempted goods in Rule 2(D)(d)of Cenvat Credit Rules, 2004, the exempted goods is not only the exempted by notification but also the goods bear a ‘nil’ rate of duty also. Therefore, in our prima facie view the Rule 6(3) is applicable, even in a case of kind of this case. However, in one of the judgments in the case of Dharamsi Morarji chemical Co. Ltd. (Supra) the revenue’s appeal is pending before the Hon’ble Supreme Court. Therefore, it will be in the interest of justice that this matter maybe finally decided only after the Hon’ble Apex Court delivers its judgment in Dharamsi Morarji chemical Co. Ltd. (Supra) case. Accordingly, we set aside the impugned order and remand the matter to the Adjudicating Authority for passing a fresh order after the decision of the Hon’ble Supreme Court in the case Dharamsi Morarji chemical Co. Ltd. (Supra).
5. Therefore, Appeal is disposed of by way of remand to the Adjudicating Authority.
(Pronounced in the open court on 11.09.2023)
