2014 (2) TMI 547 - AT - Central Excise

Availment of CENVAT Credit - Reversal of CENVAT Credit on capital goods - Held that - Capital goods have been procured in the year 1997 and availed CENVAT credit and the same has been cleared for export on 19th July 2005. As per the CBEC Board s letter 345/2/2000-TRU dated 29.08.2000 wherein it has been clarified that under the existing procedure a manufacturer can export the goods under bond without payment of duty. This is a facility that is available to the manufacturer under excise procedure. In such case, the appropriate duty of excise that is payable is nil. Therefore, there is no bar for a manufacturer to remove the inputs or capital goods for export under bond within the explanation - Appellant is not required to reverse CENVAT credit availed on the capital goods - Following decision of Videocon International Ltd. vs. CCE 2008 (7) TMI 275 - CESTAT, AHMEDABAD - Decided in favour of assessee.

Issues: Duty demand confirmation for exporting capital goods under bond, reversal of CENVAT credit on capital goods cleared "as such."

In this judgment, the appellant appealed against an order confirming duty demand for exporting capital goods under bond, along with interest and penalty. The case involved the appellant clearing an old machinery for export, purchased in 1997 and availing CENVAT credit in 2005 without paying any duty. The Revenue contended that as per Rule 3(5) and Rule 14 of the CENVAT Credit Rules, 2004, the appellant should reverse the CENVAT credit on these capital goods since they were cleared "as such." The appellant argued that they were not required to reverse the credit as they cleared the goods under bond for export, citing CBEC Board's letter and relevant case laws. The Revenue opposed this, emphasizing the rule requiring reversal of credit when capital goods are removed "as such." After considering the submissions and records, the Tribunal referred to the CBEC Board's letter allowing manufacturers to export goods under bond without duty payment, holding that in such cases, there is no requirement to reverse the CENVAT credit on capital goods. The Tribunal relied on the decision in Videocon International Ltd., setting aside the impugned order and ruling in favor of the appellant.

This judgment addresses the issue of whether CENVAT credit on capital goods should be reversed when cleared for export under bond. The Tribunal analyzed the relevant provisions of the CENVAT Credit Rules, 2004, specifically Rule 3(5), which mandates the reversal of credit when capital goods are removed "as such." The appellant argued that they were not obligated to reverse the credit based on the CBEC Board's letter allowing duty-free export under bond and cited case laws supporting their position. The Revenue, however, contended that the rule required the reversal of credit in such cases. The Tribunal examined the facts of the case, noting the procurement of capital goods in 1997 and their clearance for export in 2005. By referencing the CBEC Board's letter and the decision in Videocon International Ltd., the Tribunal concluded that in cases of exporting goods under bond without duty payment, there is no requirement to reverse the CENVAT credit on capital goods. This interpretation aligned with the procedural facility available to manufacturers under excise rules for duty-free exports.

Overall, the judgment provides clarity on the treatment of CENVAT credit on capital goods cleared for export under bond. It underscores the significance of procedural guidelines, such as the CBEC Board's letter, in determining the obligation to reverse credit in specific export scenarios. The Tribunal's reliance on precedent and statutory provisions highlights the importance of consistent interpretation and application of rules governing the taxation of exported goods. The decision ultimately favors the appellant, emphasizing the procedural facilitation for duty-free exports and the corresponding exemption from reversing CENVAT credit in such circumstances.

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