2014 (8) TMI 705 - AT - Central Excise

Cenvat Credit - Export of M.S. Billets as such to Nepal - Billets were not exported directly from the factory of manufacturer - procedure prescribed under Notification 45/2001-NT for export under bond to Nepal was not followed by the Applicant - penalty under Rule 15 (2) of CENVAT Credit Rules, 2004 and Rule 25 of Central Excise Rules, 2002 read with Section 11AC of Central Excise Act, 1944 - Held that - there are various provisions in the Central Excise Act and Rules made thereunder to facilitate the export. The different procedures prescribed in this regard are however mutually exclusive and covered different exigencies. In case of export to Nepal, rebate shall be granted to his Majesty, Govt. of Nepal as per conditions of the Notification No.40/2001. Both these rules are silent regarding availment of Cenvat credit which is governed by the provisions erstwhile Modvat Rules. CENVAT Credit Rules provide for taking the credit on inputs/input services used in or in relation to manufacture of final products for payment of duty on such final products. Board issued the impugned Circular to bring the export under 'claim of rebate' and 'export under Bond' at par. In case of export of goods to Nepal under the claims of rebate, the exporter is not allowed any rebate and therefore if such exporters are allowed to utilize the credit availed on the inputs exported under Bond to Nepal this would result into a dichotomy wherein the exporters who opt for export to Nepal under bond procedure could be put to advantage over the exporters opting for export to Nepal under claims of rebate. Under these circumstances Indo-Nepal Treaty would be redundant. - in case of export to Nepal, Board's Circular is of no help to the Applicant as implementation of the said Circular would unduly enrich those who opt for export under bond over those who export under bond - prima facie applicant is not able to make out a case for full waiver of pre deposit. - stay granted partly.

Summary

Issues:
Waiver of recovery of Cenvat Credit and penalty under Rule 15(2) of CENVAT Credit Rules, 2004 and Rule 25 of Central Excise Rules, 2002 read with Section 11AC of Central Excise Act, 1944.

Analysis:
The applicant, a manufacturer of M.S. bars and rods, exported M.S. Billets to Nepal during December 2005 to January 2007 and used the credit for duty payment on final products. The department sought to recover the credit, alleging non-compliance with export procedures. The applicant relied on Circular No. 283/117/96-CX and Tribunal judgments to support their case, emphasizing the permissibility of export under bond. However, the Revenue argued that the export to Nepal did not entitle rebate to the exporter, leading to irregular credit utilization. The Tribunal noted conflicting provisions governing exports under different rules, highlighting the absence of provisions for utilizing credit on exported inputs under present CENVAT Credit Rules.

The Tribunal analyzed the historical context of Rule 57F and the subsequent amendments, emphasizing the shift in provisions regarding export under bond. It noted that the Board's Circular aimed to align rebate and bond exports, preventing undue advantage to exporters opting for bond procedures. The Tribunal concluded that implementing the Circular in the case of exports to Nepal would create disparities, rendering the Indo-Nepal Treaty redundant. Consequently, the Tribunal found the applicant unable to justify full waiver of pre-deposit, directing a partial deposit within a specified timeline, failing which the appeal would be dismissed.

This judgment underscores the complexities arising from overlapping provisions governing export procedures and credit utilization under different excise rules. It highlights the importance of aligning export mechanisms to prevent inconsistencies and undue enrichment, ensuring a level playing field for exporters. The decision reflects a nuanced interpretation of legal provisions and precedents to balance regulatory requirements and equitable treatment in export transactions, emphasizing compliance with established procedures to avoid potential advantages or disadvantages for exporters based on the chosen export route.