2010 (5) TMI 440 - AT - Central Excise

Cenvat credit Input cleared as such - assessee took credit of the duty paid on goods subsequently goods cleared without payment of duty - CENVAT credit rules allows a manufacturer to clear as such duty paid inputs in respect of which credit has been taken either for home consumption on reversal of the credit or for export or export processing without payment of duty - activity undertaken by the appellants appear to be within the four corners of law so long as ultimate export is not questioned - orders are set aside and the appeal is allowed

Summary

Issues: Duty payment on cleared yarn without manufacturing process at Paravai unit.

Analysis:
The judgment by the Appellate Tribunal CESTAT, CHENNAI involved a case where the appellants manufactured cotton yarn at their Manaparai unit and sent it to their Paravai unit after paying duty. The Paravai unit cleared the yarn without undertaking any manufacturing process, leading to the Department demanding duty equivalent to the credit taken, imposing a penalty, and levying interest. The Department did not dispute the export of the yarn, but questioned the clearance without manufacturing at Paravai unit.

Upon review, the Tribunal found that the Department did not challenge M/s. Loyal Textiles and Mills' eligibility to procure the yarn without duty payment, process it, and export it. The CENVAT credit rules allowed the Paravai unit to clear duty-paid inputs for export processing without payment of duty, as long as the ultimate export was not in question. In this case, the yarn was sent for export processing without duty payment under Notification No. 43/2001, which was deemed lawful. Consequently, the Tribunal set aside the impugned orders, allowing the appeal and granting consequential benefits to the appellants.

In conclusion, the judgment clarified the legality of clearing duty-paid inputs for export processing without payment of duty under specific notifications, emphasizing compliance with the CENVAT credit rules and the absence of challenges to the ultimate export activity.