2017 (1) TMI 490 - AT - Central Excise

CENVAT credit - removal of inputs as such for export - input procured for intended to be used in export but actually used - credit on stainless steel plates procured from M/s Jindal Stainless Steel Co by the assessee, M/s Visen Industries Ltd, vide invoices dated 16th January 2008 and 21st February 2008 and exported as such vide ARE-1 - whether order of recovery of credit holding a view that the products were exported as such, is justified? Held that - Allowing of accounting offset would impose any limit on the number of such clearances that may be transacted by the appellant. By such procurement, by and export of such procurement as such, the appellant would accumulate adequate credit to avoid paying duty through account current. Though such accumulation is allowed when finished goods manufactured by the appellant are exported. Such a privilege is in concord with the general principle that taxes are not exported. But a manufacturer who adopts the strategy of procurement for export, on the strength of interpretation as proposed by appellant, would be misusing this facility to deprive exchequer of taxes in excess of normal offset of credit on inputs. This is not consistent with intend of tax by statute to levy of duty on manufacture of goods. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Eligibility to avail CENVAT credit on 'stainless steel plates' procured for export
- Interpretation of CENVAT Credit Rules, 2004 regarding removal of inputs for export
- Application of legal precedents in determining eligibility for CENVAT credit

Analysis:

1. The main issue in this appeal pertains to the eligibility of availing CENVAT credit on stainless steel plates procured for export. The Revenue challenged the order-in-appeal by the Commissioner of Central Excise, which denied the credit and imposed penalties. The first appellate authority relied on the decision of the Hon'ble Supreme Court in BPL Display Devices Ltd v Commissioner of Central Excise, emphasizing the interpretation of the expression 'for use by the manufacturer of the final product' and the circular of Central Board of Excise & Customs allowing removal of inputs for export under bond.

2. The Tribunal considered various legal precedents, including decisions of the Hon'ble Supreme Court, Hon'ble High Court of Madras, and Tribunal, to determine that there is no restriction on the removal of inputs for export under the CENVAT Credit Rules. However, the Tribunal highlighted the unanswered question regarding the treatment of goods used in manufacturing capital goods when not utilized for manufacturing. The Tribunal also discussed the deeming concept of treating cleared inputs as manufactured goods.

3. The Tribunal further analyzed the decision in Mahindra & Mahindra v. Collector of Central Excise, Bombay-II, which emphasized the deeming concept under the modvat scheme. The Tribunal dismissed the appeal, stating that the deeming concept aligns with the modvat scheme's objective of preventing cascading taxation. The Tribunal cautioned against overlooking the legislative intent while citing legal decisions.

4. The Tribunal delved into the legislative framework of the CENVAT Credit Rules, 2004, emphasizing the importance of aligning the availment of credit with manufacturing activities to eliminate cascading tax effects. The discussion focused on the distinction between inputs, capital goods, and goods procured for manufacturing capital goods, highlighting the specific provisions and limitations under the Rules.

5. Ultimately, the Tribunal set aside the impugned order and allowed the appeal to prevent misuse of the credit facility for export purposes, which could lead to tax evasion and undermine the taxing intent of the Central Excise Act, 1944. The decision aimed to uphold the integrity of the tax system and prevent potential abuse of credit provisions.