2007 (8) TMI 240 - AT - Central Excise

Credit disallowed on basis that assessee has certified in ARE-2 form that they aren t availing credit input stage credit isn t being claimed & exported the final goods under bond, credit availed not required to be reversed moreover ARE-2 is common for export under rebate & bond credit allowed

Summary

Issues:
1. Disallowance of CENVAT credit and demand of interest on irregular credit availed by the respondents.
2. Interpretation of rules regarding availing CENVAT credit on duty-paid inputs used in export goods.
3. Discrepancy in the interpretation of A.R.E.2 form and its impact on CENVAT credit eligibility.

Analysis:
1. The case involved the disallowance of CENVAT credit and interest demand by the Revenue against the respondents for availing credit on duty-paid cotton yarn used in export goods. The original authority disallowed the credit based on the certification in the A.R.E.2 form, indicating non-availment of CENVAT credit. However, the Commissioner (Appeals) found that the form was common for different export procedures and did not bar availing credit on duty-paid inputs used in export goods under specific rules and notifications.

2. The appeal by the Revenue raised concerns about the eligibility of the respondents for CENVAT credit due to availing credit on certain inputs used in the export of finished goods without duty payment. The Revenue feared a potential misuse where duty-paid raw materials could be replaced with duty-free ones to avail CENVAT credit for home consumption. However, the Commissioner clarified that rules did not prohibit using duty-paid goods in such export scenarios, as long as the input stage credit was not claimed back as drawback or rebate.

3. The interpretation of the A.R.E.2 form played a crucial role in determining the eligibility of CENVAT credit for the respondents. The lower authority's decision was based on a restrictive reading of the form, while the Commissioner highlighted that the form's purpose was broader and did not restrict availing credit on duty-paid inputs used in export goods under specific circumstances. The impugned order rectified the error in the original authority's decision, leading to the dismissal of the Revenue's appeal.

In conclusion, the judgment clarified the rules governing the availing of CENVAT credit on duty-paid inputs used in export goods and emphasized the importance of a comprehensive understanding of relevant forms and procedures to determine eligibility accurately. The decision favored the respondents, highlighting that the impugned order did not warrant any interference, ultimately leading to the dismissal of the Revenue's appeal.