Two exemption Notifications, which one should assessee choose? - Two clarifications from Board, which one should assessee choose?
THE answer to the first question maybe rather easy, but the answer to the second question is rather tricky.
For the first question, the Board had clarified that the assessee can choose the one beneficial to him. Now comes the second question- More than two years after the first clarification, Board now says the assessee has no choice! Confusing? But that is how the Government's tax system works.
Look at the issue:-
The period of dispute is from 7.12.2008 to 6.7.2009. During this period while one Notification No. 29/2004-CE as amended granted full exemption to certain items of Textile Sector without any condition, the second Notification prescribed a concessional rate of duty of 4% on these items, (with the benefit of CENVAT Credit.)
The dispute was with regard to whether an assessee can avail the benefit of either of the above said two notifications whichever is beneficial to him or he is bound to avail the unconditional exemption under Notification No. , as amended, during the period under dispute in terms of the provisions of section 5A(1A) of the Central Excise Act, 1944. [to brush up our memory, this provision reads as, For the removal of doubts, it is hereby declared that where an exemption under sub-section (1) in respect of any excisable goods from the whole of the duty of excise leviable thereon has been granted absolutely, the manufacturer of such excisable goods shall not pay the duty of excise on such goods.]
The Board has taken the opinion of the Law Ministry and this noble ministry has clarified that in view of the specific bar provided under sub-section (1A) of section 5A of the Central Excise Act, the manufacturer cannot opt to pay the duty under Notification dated 7.12.2008 and he cannot avail the CENVAT Credit of the duty paid on inputs.
The good Board has accepted the opinion of the Law Ministry and has directed the field formations to decide pending cases accordingly.
Now the Board has forgotten the clarification given by the Board (TRU) in DO Letter 334/1/2008-TRU - dated 29th February, 2008, wherein it was clarified that the rate beneficial to the assessee would have to be extended. Of course Board can say that that clarification was issued in a different context. If Notification No. cannot be availed, why was the Notification issued? Should the assessee suffer for the Board's mistake?
DDT had covered this issue extensively.
In DDT 1007 08.12.2008, while reporting this Notification No. , DDT said, "Now there may be certain goods which will attract nil rate of duty as well as 4% duty by two different notifications, but of course the assessee will have the choice."
In DDT 1010 12.12.2008 , DDT covered a different aspect of this Notification No. - where the Department sought to collect 4% duty and deny the full exemption. We then referring to the TRU clarification stated, "Fortunately you don't need DDT's advice. The Board itself clarified on this situation."
In DDT 1146 03.07.2009, while highlighting the plight of a textile exporter, we said, " While the ingenuity of the jurisdictional excise authorities in invoking provisions of Section5A(1A) in such cases is commendable, their utter disregard for TRU DO letter which clarifies that an assessee is free to choose a notification which is beneficial to them, is despicable. DDT hopes that the good Board will be considerate towards these exporters and come out with a suitable clarification on this issue very soon. "
After the anomaly was solved by making the duty under Notification No. also at 4%, in DDT 1158 21.07.2009 , we asked, "Now with this budget, this problem is solved by amending the said notification by Notification 11/2009-CE. But what about the intervening period i.e. from 07.12.2008 to 06.07.2009 . CBEC should clarify ".
And the Board has clarified now- that the assessee would not get the benefit, just because Board made a mistake. Heads you lose.....?
Apparently, the Law makers in the Board did not know about Clause 1A of Section 5A, when they fixed nil rate of duty and 4% duty for the same goods by Notifications and 59/2008. If they were aware of its implications, they could not have fixed two rates with one of them being NIL. It is clearly a mistake of the Board and assuming that there would be such mistakes, TRU clarified that the beneficial notification has to be allowed.
Now another clarification from another section of the Board says Notification No. cannot be availed! And that too two years after the controversy started.
DDT would like to add that it is not against the latest clarification, which is absolutely right, but it is not right for a Revenue Board to mislead its assessees by issuing two notifications, advising them that they can choose any one and after two years to clarify that they have no choice. When you have made a mistake, why can't you admit it and allow the benefit- after all, the coffers are not going to be emptied by allowing this small benefit to a few assessees for a short period of seven months.
If the revenue babus can use their enormous intelligence and wisdom to help the assessees instead of denying them benefits, this country will prosper and more revenue will come in, which will help in paying the babus the fat salaries they get.
CBEC Circular No. 937/27/2010 - Cx [F. NO. 52/1/2009- CX.1 Pt)], Dated 26.11.2010