UNION OF INDIA Vs. DHARAMPAL SATYAPAL LTD.
HIGH COURT TRIPURA
UNION OF INDIA
Dharampal Satyapal Ltd.
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Akil Kureshi, J. -
(1.) These Appeals are filed by the Central Goods and Service Tax Department to challenge a judgment dated 17.07.2018 passed by the Customs, Excise & Service Tax Appellate Tribunal, Kolkata (hereafter to be referred to as 'the Tribunal') At the time of admission of the Appeal on 24.02.2020, the Court had framed following substantial question of law:
'Whether the Customs, Excise and Service Tax Appellate Tribunal was right in law in interpreting provisions of Rule 6(1) and 6(4) of the Cenvat Credit Rules, 2004 and thereby giving benefit of exemption notifications in favour of the respondent-assessee, ignoring the contention of the appellants that the final product being exempt from payment of basic duties, the assessee was not entitled to claim the benefit of the notification dated 09.07.2004 as amended from time to time?'
(2.) The relevant facts are that the respondent M/S. Dharampal Satyapal Ltd. is a Company registered under the Companies Act and is engaged in the manufacture of zarda, which is a scented tobacco and for which purpose the Company holds a Central Excise registration and necessary licenses. The product manufactured by the assessee falls under Chapter 24 of Central Excise Tariff Act, 2005 under Tariff Sub Heading 2403-99-30. The Government of India had issued an exemption Notification dated 21.01.2004 granting 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 including the subheading under which the assessee's product fell. This was subject to certain conditions and was made available in respect of units located in the States of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland or Tripura. The assessee had its manufacturing unit located in Tripura and therefore, availed the benefit of this exemption Notification from payment of the excise, additional excise and other duties. This exemption was 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 under the said Notification would be utilized by the manufacturer only for specified investments.
(3.) The assessee claimed CENVAT credit on the inputs utilized for manufacture of the final product. The adjudicating authority, however, was of the opinion that since the final product was exempt from payment of due date, the assessee could not have availed a CENVAT credit paid on the inputs utilized in such final product. The adjudicating authority therefore issued a show cause notice on the premise that the assessee'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. He called upon the assessee why the CENVAT credit to the tune of Rs.3.48 Crores (rounded off) availed by the assessee on inputs and capital goods for the period between 01.03.2005 to 30.09.2005 should not be reversed or recovered. He also raised demands for recoveries of additional duty of excise and other duties on the CENVAT credit availed by the assessee. He also proposed to impose penalty. Further notice was issued for recovery/reversal of CENVAT credit to the tune of Rs.4.25 Crores (rounded off) with penalty for the period between 01.10.2005 to 31.03.2006 and later periods.;
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