2014 (3) TMI 590 - AT - Central Excise

Denial of CENVAT Credit - Non receipt of foreign exchange after export of goods - Vehicle stands exported under Rule 19 under bond and Export Completion certificate stands issued to the appellant, but they have not received the foreign exchange for the said cars - Held that - there is no dispute about the completion of export in terms of Rule 19 of Central Excise Rules. There is no condition, as regards receipt of foreign exchange, in the Cenvat Credit Rules - Following decision of Flex Engg. Ltd. Versus Commissioner of Central Excise 2012 (1) TMI 17 - Supreme Court of India - Stay granted.

Summary

Issues:
1. Denial of cenvat credit to the appellant for exporting new developed modal vehicles without receiving foreign exchange.
2. Denial of credit based on the argument that the inputs did not result in the manufacture of a complete motor vehicle.

Analysis:
1. The appellate tribunal found that the denial of cenvat credit to the appellant, who exported new developed modal vehicles to foreign associates for testing without receiving foreign exchange, lacked merit. The tribunal noted that while the vehicles were exported under Rule 19 under bond and an Export Completion certificate was issued, there was no requirement in the Cenvat Credit Rules for the receipt of foreign exchange. Therefore, the tribunal did not find any prima facie merits in the revenue's argument regarding the denial of credit based on non-receipt of foreign exchange.

2. Regarding the second ground for denial of credit, the tribunal observed that the Commissioner relied on previous decisions, including one related to the use of inputs in trial runs. However, the tribunal highlighted that the decisions cited by the Commissioner had been reversed by the Hon'ble Supreme Court. Despite the Commissioner's reliance on these decisions, the tribunal found no prima facie merits in the argument for denying credit based on the inputs not resulting in the manufacture of a complete motor vehicle.

3. The tribunal, after considering the submissions from both sides, concluded that there was no dispute about the completion of export under Rule 19 of the Central Excise Rules. Additionally, the tribunal emphasized that the absence of a requirement for foreign exchange receipt in the Cenvat Credit Rules undermined the revenue's basis for denying the credit. Furthermore, the tribunal pointed out the reversal of previous decisions cited by the Commissioner, indicating a lack of merit in the grounds for denial of credit.

4. Ultimately, the tribunal decided to dispense with the condition of pre-deposit of dues against the appellant and allowed the stay petition unconditionally in both cases. This decision was based on the tribunal's findings that the denial of cenvat credit to the appellant was not justified under the circumstances presented during the proceedings.