2016 (10) TMI 908 - AT - Central Excise

Reversal of CENVAT credit of CVD - manufacture of Insulated Wires and Cables falling under Chapter 8544 of the Central Excise Tariff Act - credit of the CVD paid, availed on imported capital goods - whether the denial of CENVAT credit on the ground that capital goods was found defective and were re-exported by the appellant under bond without payment of duty justified? - qualification as capital goods as defined in Rule 2 (a) of the Cenvat Credit Rules, 2004 - Held that - It is not in dispute that the appellants have re-exported the defective capital goods without putting them to use. They have cleaned these goods as such under bond and export the goods without payment of duty. Para 3.4 of Chapter 5 of CBEC Central Excise Manual reads as follows - 3.4 There is no bar for a manufacturer to remove the inputs or capital goods as such for export under bond . - Therefore, the respondent cannot be faulted for removing the goods without payment of duty for export. Reliance placed on the decision of case of Glass and Ceramic Decorators vs. CCE, Mumbai - I 2014 (9) TMI 864 - CESTAT MUMBAI where it was held that In respect of the goods on which credit has been taken, Circular issued by Board in 1996 as well as in 2000, clearly says that the manufacturer assessee is entitled to clear the inputs or capital goods for export (on which credit has been taken) under bond without payment of duty. The CBEC has also in the clarified Circular dated 29/8/2000 that there is no bar for manufacturer to export inputs and capital goods under bond. In any case if the capital goods would have been cleared for export on payment of duty the same would have been allowed as rebate to the respondent as per the provisions of Rule 19 of the Central Excise Rules, 2002. Demand of reversal of the Cenvat credit not justified - appeal dismissed - decided against Revenue.

Issues:
1. Disallowance of Cenvat credit on re-exported defective capital goods.
2. Interpretation of the term "use" in the context of availing Cenvat credit.
3. Legality of re-exporting capital goods without payment of duty.

Analysis:
1. The appeal challenged the Commissioner (Appeals) order allowing Cenvat credit on imported capital goods that were re-exported by the appellant without payment of duty. The Revenue contended that the Cenvat credit should be reversed as the capital goods were not used in the factory for manufacturing excisable goods. The Tribunal examined the definition of capital goods and previous case laws to determine the eligibility for Cenvat credit in such cases.

2. The Tribunal considered the definition of capital goods under Rule 2(a) of the Cenvat Credit Rules, emphasizing that the term "use" includes goods intended for future use in the factory. Referring to the case of Ispat Metallics Ltd, the Tribunal held that the potential use by the manufacturer, even at a later date, entitles them to the credit. Therefore, the appellant was deemed eligible for Cenvat credit on the imported capital goods upon their receipt in the factory.

3. Regarding the re-export of defective capital goods without payment of duty, the Tribunal cited relevant case laws and Circulars to support the appellant's action. It was noted that there is no prohibition on a manufacturer removing inputs or capital goods "as such" for export under bond. The Tribunal clarified that when capital goods are re-exported under bond, no duty payment is required. The Circular dated 29/8/2000 further supported the permissibility of exporting inputs and capital goods under bond.

In conclusion, the Tribunal dismissed the Department's appeal, finding no justification for demanding the reversal of the Cenvat credit. The decision was based on the interpretation of the term "use" in the context of availing Cenvat credit and the legality of re-exporting capital goods without payment of duty, as supported by relevant case laws and Circulars.

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