2010 (4) TMI 812 - CGOVT - Central Excise

Cenvat credit Rebate - applicant has procured the exported goods as capital goods and exported them after carrying out certain tests/processes which does not amount to manufacture the capita goods has been exported as such under Rule 3(4) of the Cenvat Credit Rules, 2002 as themselves declared by the applicant in their form ARE-1s. As per Rule 3(4) of the Cenvat Credit Rules, 2002, the applicant were required to reverse the amount of cenvat credit taken on these capital goods on receipt in their factory. But the applicant has paid duty on the transaction value as if the said goods are manufactured by them which is not the case, as no manufacturing activity was carried out on these goods, and they were removed as such after carrying out certain tests. The manufactured goods can be removed from the factory or warehouse of the manufacturer only under claim of rebate. This being not the case the applicant is not eligible to claim rebate on the transaction value. The rebate claim has to be restricted to the amount of cenvat credit availed on these capital goods under Rule 3(4) of the Cenvat Credit Rules, 2002, no infirmity in the impugned order-in-appeal and upheld, Revision application is rejected being devoid of merit.

Issues Involved:
- Eligibility for Cenvat credit under Rule 18 of Cenvat Credit Rules, 2002
- Admissibility of rebate claim under Notification No. 40/2001-C.E. (N.T.) read with Rule 18 of Central Excise Rules, 2002
- Interpretation of Rule 3(4) of the Cenvat Credit Rules, 2002
- Compliance with procedural requirements under Section 11A of the Central Excise Act, 1944
- Consideration of duty paid on exported goods
- Entitlement for full refund of duty paid at the time of export
- Assessment of obligation to pay duty and admissibility of rebate
- Reversal of Cenvat credit on capital goods exported under Rule 3(4) of Cenvat Credit Rules, 2002

Analysis:

1. Eligibility for Cenvat credit under Rule 18 of Cenvat Credit Rules, 2002:
The case involved a dispute regarding the eligibility of M/s. Honda Motorcycles and Scooters India (Pvt.) Ltd. for Cenvat credit under Rule 18 of the Cenvat Credit Rules, 2002. The Department contended that the company was not entitled to a Cenvat credit of Rs. 2,10,506 as the goods in question were brought into the factory for trading purposes. This issue formed the basis of the dispute leading to the issuance of show cause notices.

2. Admissibility of rebate claim under Notification No. 40/2001-C.E. (N.T.) read with Rule 18 of Central Excise Rules, 2002:
The Department also challenged the rebate claim of Rs. 4,52,933 made by M/s. Honda Motorcycles and Scooters India (Pvt.) Ltd. for exporting goods, citing that the rebate was only admissible for excisable goods exported directly from a factory or warehouse after payment of duty. This challenge was a crucial aspect of the case.

3. Interpretation of Rule 3(4) of the Cenvat Credit Rules, 2002:
The Revenue argued that under Rule 3(4) of the Cenvat Credit Rules, 2002, the Cenvat credit taken should be equal to the amount paid, and the rebate should be restricted accordingly. This interpretation was central to the Revenue's appeal against the impugned order.

4. Compliance with procedural requirements under Section 11A of the Central Excise Act, 1944:
One of the grounds for the revision application was the alleged non-compliance with the procedural requirements under Section 11A of the Central Excise Act, 1944, which raised concerns about the validity of the impugned order and the limitation on the refund.

5. Consideration of duty paid on exported goods and entitlement for full refund:
The applicant contended that they should be entitled to a full refund of the duty paid at the time of export, emphasizing that the duty of Rs. 4,52,933 was indeed paid on export. This argument questioned the restriction of the rebate to the Cenvat credit availed rather than the full duty paid.

6. Assessment of obligation to pay duty and admissibility of rebate:
The applicant raised concerns regarding the obligation to pay duty and the admissibility of the rebate, highlighting that the duty paid should entitle them to a full refund, especially considering the payment made in excess of what was payable/reversible.

7. Reversal of Cenvat credit on capital goods exported under Rule 3(4) of Cenvat Credit Rules, 2002:
The Government's observation focused on the procurement and export of capital goods by the applicant, emphasizing that the exported goods were not manufactured but exported as such after certain tests. This analysis led to the conclusion that the rebate claim should be restricted to the Cenvat credit availed on these capital goods under Rule 3(4) of the Cenvat Credit Rules, 2002.

In conclusion, the judgment upheld the impugned order-in-appeal, rejecting the revision application for being devoid of merit. The decision was based on a detailed analysis of the provisions of the Cenvat Credit Rules, 2002, and the specific circumstances of the case regarding Cenvat credit eligibility, rebate claims, and the interpretation of relevant rules.

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