2016 (1) TMI 203 - AT - Central Excise

Cenvat Credit - Export of exempted goods - Manufacture and Export of grey fabrics without payment of duty - Appellant did not execute any bond for export of the grey fabrics as required on an understanding that the clearances were exempted from payment of duty - appellant was issued a show-cause notice for demand of 5% or 10% of the value of goods cleared for export, which were exempted since no separate accounts were maintained - Held that - refund of input credit is admissible when exempted goods are exported without execution of bond. - The ratio of the judgement of this Tribunal in the case of Well Known Polyesters Ltd. v. CCE - 2011 (1) TMI 664 - CESTAT, AHMEDABAD would cover the issue in hand. - Decided in favor of assessee.

Summary

Issues:
1. Correct availing of CENVAT credit on locally purchased yarn.
2. Requirement to pay an amount equal to 5% or 10% of the value of exempted goods cleared for export.

Analysis:

Issue 1: Correct availing of CENVAT credit on locally purchased yarn:
The appellant, a composite mill, manufactured yarn and procured duty-paid yarn for producing grey fabrics exclusively for export. The dispute arose when the appellant availed CENVAT credit on the duty paid yarn used in manufacturing the exempted grey fabrics. The Revenue contended that since grey fabrics were exempted, the appellant should reverse the CENVAT credit. However, the Tribunal found that the appellant complied with Rule 49A of the Central Excise Rules, discharging duty liability on in-house manufactured yarn. Additionally, the Tribunal noted that the appellant rightfully availed CENVAT credit on locally procured duty-paid yarn. The Tribunal emphasized that the provisions of Rule 57CC, not Rule 57C, were applicable in this case.

Issue 2: Requirement to pay an amount equal to 5% or 10% of the value of exempted goods cleared for export:
The Revenue argued that the appellant should pay an amount equal to 5% or 10% of the value of exempted goods cleared for export due to availing CENVAT credit on duty paid yarn used in manufacturing the grey fabrics. However, the Tribunal disagreed with this contention. It highlighted that the appellant had paid duty on grey fabrics cleared for home consumption and followed the provisions of Rule 49A when clearing grey fabrics for export. The Tribunal also referenced a previous judgment to support the appellant's position that non-execution of a bond or Letter of Undertaking (LUT) may not be necessary for exports as long as the goods are cleared for export or exported. Ultimately, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing compliance with relevant rules and regulations and rejecting the Revenue's demand for payment based on the availed CENVAT credit.