2011 (5) TMI 518 - AT - Central Excise

Reversal of Cenvat Credit - goods being Re-imported - Held that - In this case capital goods had been exported to the supplier for the purpose of repairs and the same had been exported under bond - Hence, the provisions of Rule 6(6) of Cenvat Credit Rules would be applicable in such cases also where some Cenveted capital goods are cleared for export under bond without payment of duty - And such cases, the Cenvet Credit would not require to be reversed - In terms of Board s Circular dated 29.08.2000 in such a situation, Cenvat Credit was not required to be reversed - Decided in favour of assessee.

Summary

Issues:

1. Whether Cenvat Credit availed on capital goods exported abroad for repair should be reversed.
2. Applicability of Rule 6(6) of Cenvat Credit Rules regarding non-reversal of Cenvat Credit for goods exported under bond.
3. Interpretation of Board's Circular dated 29.08.2000 in relation to Cenvat Credit reversal.

Analysis:

1. The case involved a manufacturer of various products who imported capital goods and took Cenvat Credit of additional custom duty on them. Subsequently, due to defects, the capital goods were exported to the supplier without paying any duty under LUT-I. The Department contended that the Cenvat Credit availed on these goods should have been reversed at the time of sending them abroad for repair. The Assistant Commissioner confirmed the Cenvat Credit demand, which was upheld by the Commissioner (Appeals), leading to the filing of the present appeal.

2. The advocate for the appellant argued that since the goods were exported under bond without payment of duty for repairs, the Cenvat Credit reversal was not required, citing Board's instructions and a previous Tribunal case supporting this stance. On the other hand, the Departmental Representative defended the order by emphasizing the inapplicability of the Board's instructions to the current Cenvat Credit provisions and the distinction between goods manufactured by the assessee and those in question.

3. The Tribunal analyzed the situation, noting that the capital goods were exported for repairs under bond, and Rule 6(6) of Cenvat Credit Rules regarding non-reversal of Cenvat Credit for goods exported under bond should apply in such cases. Referring to the Board's Circular and a previous Stay Order, the Tribunal concluded that there was no justification for reversing the Cenvat Credit in this scenario. Consequently, the impugned order was set aside, and the appeal was allowed based on the understanding that the Cenvat Credit need not be reversed in cases where capital goods are exported under bond for repairs and subsequently re-imported after necessary repairs.