Excise | Captive Exemption Cannot Be Denied When Final Products Are Partly Cleared On Duty Payment & Partly Under Exemption: CESTAT
The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that the captive exemption under Notification 67/95-CE remains available even if the final product is partly cleared on duty payment and partly under exemption. Central Excise Notification No. 67/95-CE provides an exemption from excise duty for specified inputs and capital goods that...
The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that the captive exemption under Notification 67/95-CE remains available even if the final product is partly cleared on duty payment and partly under exemption.
Central Excise Notification No. 67/95-CE provides an exemption from excise duty for specified inputs and capital goods that are manufactured and captively consumed within the same factory for the production of final, dutiable products.
P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member) stated that captive exemption under Notification No. 67/95-CE is available to the relays captively used in the manufacture of control panels cleared on payment of duty, under Notification No. 12/2012-CE.
In this case, the assessee/appellant manufactures Relays (Chapter 85) and uses them captively in the manufacture of Control Panels (CH 8537).
Control Panels are cleared (i) on payment of duty for home consumption, (ii) under exemption Notification No.12/2012CE, and (iii) for export under LUT.
Exemption was claimed by the assessee for the Captive consumption of the relays under Notification 67/95CE, and the Department denied the exemption on the ground that the final products (Control Panels) were also cleared under an exemption (Notification 12/2012-CE), and therefore proviso to Notification 67/95-CE barred captive exemption.
A Show Cause Notice was issued on the relays captively consumed, which was confirmed by the Adjudicating Authority, whereby duty, interest and Penalty were confirmed.
The issues before the bench were:
Whether an exemption under Notification No. 67/95-CE is available on relays captively consumed in the manufacture of control panels, when such panels are partly cleared on payment of duty and partly under Notification No. 12/2012-CE?
Whether the assessee can be said to have satisfied the “obligation under Rule 6 of CENVAT Credit Rules, 2004” for the purpose of proviso (vi) to Notification No.67/95-CE?
The bench after reading Notification No. 67/95-CE with proviso (vi), observed that the bar in the proviso is not absolute: where the manufacturer is producing both dutiable and exempt goods and discharges the obligation under Rule 6 of CCR, the captive exemption on inputs is expressly saved.
The Tribunal opined that the assessee's relays, captively consumed in the manufacture of control panels, are in principle covered by the main body of Notification 67/95-CE.
Regarding the obligation under Rule 6 of CENVAT Credit Rules, 2004, the bench disagreed with the conclusion of the lower authority that the assessee has “not discharged” obligations under Rule 6 of CCR, 2004.
Once we hold that captive exemption under Notification No. 67/95-CE is available to the relays captively used in the manufacture of control panels cleared on payment of duty, under Notification No. 12/2012-CE and for export, the very foundation of the duty demand of Rs.10,39,545/- collapses. Accordingly, the demand of duty is liable to be set aside on merits, stated the bench.
In view of the above, the Tribunal allowed the appeal.
Case Title: M/s. GE T&D India Ltd. v. Commissioner of GST and Central Excise
Case Number: Excise Appeal No. 40763 of 2018
Counsel for Appellant/ Assessee: Joseph Prabhakar
Counsel for Respondent/ Department: M. Selvakumar