Order Date – 07 July 2023

Parties: Macleods Pharmaceuticals Ltd & Vinayak Shirodkar Vs C.C.E. & S.T.-Daman

Facts –

• The Appellant, Macleods Pharmaceuticals Ltd, engaged in the manufacture of various medicaments. Some of the medicaments are exempted Notification No.4/06-CE dated 01.03.2006 at Sr. No. 54 and Notn.No.4/06-CE dtd.1.3.2006 at Sr. No. 59 subject to fulfillment of various conditions stipulated therein.
• The said goods were cleared at nil rate of duty availing exemption for home clearances. However, goods are exported under Bond/LUT or under rebate under a bonafide belief that exemption notification issued under Section 5A was not available for export.
• A show cause notice was issued proposing to recover 5% of total value of exports under bond/ rebate made during the period April 2010 to March 2011 along with interest and penalty. The demand was confirmed observing that since the goods exported were fully and unconditionally exempt from duty neither input stage rebate is admissible nor such goods could have been exported under Bond/LUT and hence, they were required to pay presumptive tax of 5% of the value of the exempted goods exported under Rule 6(3) of Cenvat Credit Rule.

Issue –

• Whether the appellant is required to pay presumptive tax of 5% of the value of the exempted goods exported under Rule 6(3) of Cenvat Credit Rule?

Order –

• The Tribunal observed that since appellant have not availed the exemption Notification No. 4/2006-CE question of application of rule 6(3) does not apply. Moreover, in respect of the goods cleared under claim for rebate the appellant have admittedly paid the excise duty. Once the excise duty has been paid the demand under rule 6(3) shall not be sustainable.
• Further, in terms of Rule 6(6)(v) of Cenvat Credit Rules, 2004, the provision of sub Rules (1),(2),(3) and (4) shall not be applicable in cases the goods removed without payment of duty, therefore in case of goods cleared under Bond/LUT also the demand under Rule 6(3) of Cenvat Credit Rules, 2004 will not sustain.
• In this case at the most the case should have been framed for violation of condition of the Notification No. 42/2001-CE(NT) but due to violation of the such condition the benefit of Rule 6(6)(v) of Cenvat Credit Rules, 2004 cannot be disallowed by the revenue for the simple reason that such parallel provision was neither made nor any such rider is provided with condition (1)(iv) of Notification No. 42/2001-CE(NT), even there is no mentioned in Rule 6(6)(v) of Cenvat Credit Rules, 2004 that such clearance should be strictly made under Notification No.42/2001-CE(NT).
• Since the demand of amount itself is not sustainable, personal penalty imposed on Shri Vinayak Shirodkar will also not sustain. Accordingly, the penalty is set aside. The appeal is allowed.