2020 (12) TMI 634 - AT - Central Excise

CENVAT Credit - capital goods - production and clearance of dutiable goods takes place within two years from the date of commencement of production / installation of capital goods - applicability of amended rule 6(4) of CCR - goods exported under bond - exempt goods or not - HELD THAT - On perusal of the amended rule 6(4) extracted supra, it is clear that no credit shall be allowed on capital goods used exclusively in the manufacture of the exempted goods or in providing exempted services for a period of two years from the date of commencement of the commercial production or from the date of installation of capital goods. In the instant case the fact that the capital goods are installed during 2016-17 is not disputed. The only dispute that is raised by the Revenue is that during 2016-17 the appellant has either cleared the goods availing the exemption under notification 30/2004 or exported the goods under bond under rule 19. It appears that the impugned order fails to take into consideration the amended rule which is very clear that credit is not admissible if the said capital goods are utilized exclusively in the manufacture of exempted goods for a period of two years from the date of commencement of commercial production or from the date of installation of capital goods. In the instant case, the capital goods are installed after commencement of production in the year 2016-17. The credit would have been inadmissible to the appellant if they have continued to clear exempted goods till 2018-19. However, records of the case indicate that the appellant has cleared goods on payment of duty during 2017-18 as evidenced by the ER-1 filed for the month of June 2017. Therefore, in view of the amended provisions the credit is admissible to the appellant. The appellant have also taken an alternative plea that goods exported under bond cannot be treated as exempted goods and therefore inspite of the fact that they have cleared only exempted goods during 2016-17 are cleared goods for export under Rule 19, credit is admissible - the provisions of amended rule being clear and the conditions thereupon have been fulfilled by the appellant and hence credit is admissible. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Admissibility of CENVAT credit on capital goods used in the manufacture of exempted goods.
2. Whether goods exported under bond can be considered exempted goods.

Analysis:
1. The case involved the appellant, engaged in manufacturing "Polyester Viscose Yarn," who installed capital goods in their factory during the financial year 2016-17. While partly clearing final products availing exemption, some goods were exported under bond. A show cause notice was issued questioning the credit availed by the appellant. The original authority dropped the notice, but the Commissioner (Appeals) set it aside, demanding the duty. The appellant argued that as per Rule 6(4) of CENVAT Credit rules, credit of capital goods is allowable if used for dutiable goods within two years of installation, citing relevant case laws. The Commissioner contended that duty payment in 2017-18 was irrelevant for the 2016-17 period, relying on outdated case laws. The Tribunal held that the credit was admissible as the capital goods were used for dutiable goods within the stipulated period, overturning the Commissioner's decision.

2. The Tribunal also addressed whether goods exported under bond could be considered exempted goods. The appellant argued that as goods were exported under bond during 2016-17, they should not be treated as exempted. Citing relevant case laws, the Tribunal agreed with the appellant's argument, stating that the amended rule's provisions were clear, and the conditions were met, making the credit admissible. The Tribunal set aside the impugned order and allowed the appeal, providing consequential relief as per law.

In conclusion, the Tribunal ruled in favor of the appellant, allowing the CENVAT credit on capital goods used for dutiable goods within the stipulated period and considering goods exported under bond as non-exempted, thereby granting the appeal and providing necessary relief.