For imported goods, it is impossible to claim CENVAT credit and hence custom duty exemption can not be denied. Supreme Court dismissed SLP
In a recent order, Hon’ble Supreme Court has dismissed Special Leave Petition (SLP) of the Custom/Excise Department against the order of the CESTAT holding that it is impossible for anyone outside India to avail the benefit of CENVAT credit and therefore in respect of imports, it is impossible that the condition of exemption notification that CENVAT credit not being availed is not fulfilled.
ABCAUS Case Law Citation:
4241 (2024) (08) abcaus.in SC
In the instant case, the Revenue had filed an appeal before the Hon’ble Supreme Court challenging the order passed by the CESTAT holding that the respondent fulfilled the condition of exemption notification.
The issue involved in these appeals is whether the respondent was entitled for the benefit of custom/excise duty exemption as per notification 01/2011-CE or 02/2011-CE for the fertilizer 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.
In this case the respondent imported raw material and claimed the aforesaid Central Excise exemption notifications which were conditional notifications. The condition therein was that no CENVAT credit should have been availed in the manufacture of the goods.
It was the case of the revenue that the appellant had 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 was available to them.
It was the case of the respondent that the manufacturer of the product is located outside India and hence it was impossible for them to avail CENVAT credit. By no stretch of imagination, can it be alleged that CENVAT credit had been availed. Therefore, as far as imports were concerned, the condition was deemed to have been met.
Before the CESTAT, the Revenue contended that unless it can be shown that the conditions have been fulfilled the assessee was not entitled to the benefit of the conditional exemption notification. The burden of proving that the condition has been met rests on the assessee and they had not discharged this burden.
The CESTAT observed that it was not in dispute that the goods had been imported and therefore were manufactured outside India. The CENVAT Credit Rules are framed under the Central Excise Act, 1944 which applies to the whole of India but not beyond.
The CESTAT opined that 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. The CESTAT placed reliance on the judgment of the Hon’ble Apex Court and held that the assessee was entitled to the benefit of the exemption notifications.
Not satisfied with the order of the CESTAT, the Revenue filed an appeal before the Apex Court. However, after hearing the councils, the Hon’ble Supreme Court declined to interfere with the judgment(s) and order(s) under challenge.
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