2017 (12) TMI 212 - AT - Central Excise

CENVAT credit - finished goods which are exported - Held that - The appellant has procured the inputs on payment of duty and has availed Cenvat Credit thereon. However, it is not in dispute that finished products have been cleared for export for payment of duty. In the process of payment of duty the Cenvat Credit availed on inputs already stands paid back - there is no justification for demanding repayment of Cenvat Credit all over again by taking the view that the credit availed was irregular - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of Cenvat Credit Rules regarding availing credit on inputs used for export products under area-based exemption.

Analysis:
The appellant, a manufacturer of automobile parts, availed area-based exemption under notification no.50/2003-CE while also opting to procure inputs for export products without duty payment under notification no.47/95. However, they paid duty on inputs, manufactured, and exported finished products, leading to the Department denying Cenvat Credit and imposing a duty demand with penalties. The appellant argued that Rule 6 of Cenvat Credit Rules allows credit for exported goods, regardless of exemption on final products. The Department contended that since the appellant enjoyed area-based exemption, no credit for duty paid inputs should be allowed. The Tribunal noted the appellant's duty payment on exported goods and the Department's denial of rebate on terminal excise duty, emphasizing Rule 6(6) exempting credit restrictions for exports under bond.

The Tribunal found that the appellant, despite full exemption, paid duty on inputs, availed Cenvat Credit, and exported finished products after paying duty. The dispute centered on whether credit could be allowed for exported goods under full exemption. Rule 6 prohibits credit for inputs used in exempted goods but exempts certain cases like export clearances under bond. The Tribunal held that the appellant, having paid duty on exported goods, should retain the availed Cenvat Credit as the duty payment effectively nullified the credit. The impugned order was set aside, allowing the appeal in favor of the appellant.

In conclusion, the Tribunal's decision clarified that duty payment on exported goods under full exemption entitles the manufacturer to retain availed Cenvat Credit, aligning with Rule 6 provisions exempting credit restrictions for export clearances. The judgment emphasizes the practical application of Cenvat Credit Rules in cases involving duty payment on exported goods despite area-based exemptions, ensuring fairness and compliance with the legal framework.