2021 (12) TMI 1009 - AT - Central Excise

CENVAT Credit - cap and brush exported - common input service used for clearance of manufactured goods as well as trading goods - pure trading activity or a manufacturing activity in terms of Rule 6(3)? - requirement of reversal of credit under Rule 6(3) of CCR - HELD THAT - The trading goods, i.e. cap and brush was procured by the appellant duly duty paid and the same was exported. Since the appellant has not taken the cenvat credit, they were neither required to pay the duty nor to execute bond for export, therefore, for export of such trading goods no bond was executed. This issue has come up before the Hon ble Bombay High Court that whether to allow the benefit of 6(6)(v) execution of export bond is compulsory or otherwise, the Hon ble Bombay High Court in case of REPRO INDIA LTD. VERSUS UNION OF INDIA 2007 (12) TMI 209 - BOMBAY HIGH COURT clearly held that in case of non-dutiable goods or exempted goods, even though export was not made under bond, benefit of Rule 6(6)(v) cannot be denied and consequently, Rule 6(3)(b) is not attracted. It is settled that even though the goods are exported without bond, the benefit of Rule 6(6)(v) is available to the assessee, and consequently, Rule 6(1), (2), (3) And (4) shall not attract - Appeal allowed - decided in favor of appellant

Summary

Issues:
- Whether the appellant is required to reverse the proportionate credit attributed to the common input service used for clearance of manufactured goods and trading goods?
- Whether the appellant is entitled to the benefit of Rule 6(6)(v) of Cenvat Credit Rules, 2004 for export of trading goods without executing a bond?

Analysis:

Issue 1:
The appellant, engaged in the manufacture of Nail Polish bottles, exported the bottles along with caps and brushes procured from the open market without availing cenvat credit or paying any duty. The department contended that the appellant should reverse the proportionate credit attributed to the common input service used for clearance of both manufactured and trading goods. The appellant argued that since the trading goods were exported without a bond, which is required only if excise duty is payable, no duty being payable in this case, no bond was executed. The appellant cited various judgments supporting their stance, including Repro India Ltd. and Coca Cola India Pvt. Ltd. The Tribunal noted that the appellant procured duty-paid trading goods and exported them without taking cenvat credit, thus not requiring duty payment or bond execution. Citing the Bombay High Court case of Repro (India) Ltd., the Tribunal held that the benefit of Rule 6(6)(v) cannot be denied for non-dutiable goods, even if exported without a bond. Therefore, the appellant was not required to reverse the credit, and the impugned order was set aside.

Issue 2:
The department argued that Rule 6(6)(v) mandates execution of a bond for excisable goods to avoid the application of Rule 6(3). They relied on case laws like Lally Automobiles P. Ltd. and Ruchika Global Interlinks to support their position. However, the Tribunal, following the precedent set by the Bombay High Court and its own previous judgments, held that the benefit of Rule 6(6)(v) is available even if goods are exported without a bond for non-dutiable goods. As the appellant exported duty-paid trading goods without availing cenvat credit, the requirement of bond execution did not apply. Therefore, the appellant was entitled to the benefit of Rule 6(6)(v) and the impugned order was overturned, allowing the appeal.

This judgment clarifies the application of Rule 6(6)(v) of the Cenvat Credit Rules, 2004 in the context of exporting trading goods without bond execution, providing guidance based on established legal precedents and interpretations.