2018 (1) TMI 1012 - AT - Central Excise

CENVAT credit - Rule 6(4) of the CCR, 2004 - whether the goods which are so cleared for export are to be considered as exempted goods or dutiable goods? - Held that - it is settled principle of law that only the goods are exported from the country and not the taxes. The Central Excise law provides for clearance of goods for export either under bond in which case the terminal excise duty is not paid at the time of clearance from the factory but in the terms of the bond the manufacturer is obligated to export the goods and get the bond closed - also, there is no doubt that the goods manufactured have been partially exported and partially cleared to the domestic tariff area. The benefit of Rule 6(6) (v) is required to be extended to the appellant since the goods have in fact been exported - the appellant will be entitled to the Cenvat Credit on the capital goods used partially for export even thiugh domestic clearances are exempted. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Dispute over denial of Cenvat credit on capital goods used in manufacturing exempted goods
- Interpretation of Central Excise Notification No. 30/04
- Applicability of Cenvat Credit Rule 6(4) on capital goods exclusively used for exempted goods
- Consideration of goods cleared for export as exempted or dutiable goods

Analysis:
The appeals were filed against an Order-in-Original denying Cenvat credit on capital goods used in manufacturing cotton yarn and knitted fabrics under Central Excise Notification No. 30/04. The dispute arose as the revenue contended that since the goods were exempted under the notification, no Cenvat credit could be availed. The appellant argued that goods exported should not be considered exempted, citing Rule 6(6)(v) of the Cenvat Credit Rules, 2004. The appellant also relied on precedents from the Bombay and Himachal Pradesh High Courts to support their position.

During the hearing, the appellant claimed that the capital goods in question were also used for manufacturing goods exported under rebate. The revenue justified the denial of Cenvat credit, emphasizing that the goods remained fully exempted under the notification. The Tribunal considered the record and noted that the same capital goods were used for both domestic clearances and exports. The crux of the matter was whether goods cleared for export should be classified as exempted or dutiable.

The Tribunal referenced Cenvat Credit Rule 6(4) which prohibits credit on capital goods exclusively used for exempted goods. However, Rule 6(6)(v) exempts certain circumstances, such as clearance for export under bond. The Tribunal observed that part of the exports occurred under bond, while others were exported as exempted under the notification. It reiterated that only goods are exported, not taxes, and exporters have options to clear goods under bond or pay duty and claim a rebate. Ultimately, the Tribunal extended the benefit of Rule 6(6)(v) to the appellant, allowing Cenvat credit on capital goods used for exports, even if domestic clearances were exempted.

In conclusion, the impugned order was set aside, and the appeal was allowed, with the Tribunal emphasizing that the appellant was entitled to Cenvat credit on capital goods used for exports alongside exempted domestic clearances.