2023 (11) TMI 369 - AT - Central Excise

Recovery/reversal of credit - Export of Goods - Credit was availed under Rule 16 on returned Goods - credit not reversed by the appellants when the chassis were exported and cleared under N/N. 108/1995-C.E. along with interest and for imposing penalties. The main allegation raised by the Department is that as the credit is availed by the appellants under Rule 16 of the Central Excise Rules, 2002, they cannot remove the goods for export or clear the same under exemption Notification No. 108/1995-C.E. without reversing the credit. HELD THAT - Rule 16 makes it amply clear that the credit is availed in terms of the CENVAT Credit Rules, 2004. There is no embargo envisaged under Rule 16 for export of the goods or for clearance under the exemption Notification. The view taken by the authorities below is that reversal of the credit availed under Rule 16 is a pre-condition for removal of the said goods and therefore, the appellant has to reverse the credit. It is also alleged that when the goods were not originally meant for export, it cannot be later exported when the goods are brought back to the factory under Rule 16 - the said view of the Commissioner (Appeals) cannot be endorsed upon. The demand cannot sustain. The impugned order is therefore set aside - Appeal allowed.

Summary

Issues:
The main issue in this case is whether the appellants have to reverse the credit availed under Rule 16 of the Central Excise Rules, 2002 when the goods are exported or cleared under exemption Notification No. 108/1995-C.E. dated 28.08.1995.

Comprehensive Details:

1. Background of the Case: The appellants are engaged in the manufacture of motor vehicles and parts falling under Chapter 87 of the Central Excise Tariff Act, 1985. They availed credit of duty paid on chassis under Rule 16 for various activities including exports and clearance under exemptions.

2. Department's Allegation: The Department contended that the appellants must reverse the credit availed under Rule 16 when goods are exported or cleared under exemptions, leading to show cause notices and demands for wrongly availed credit, interest, and penalties.

3. Orders of Original Authority and Commissioner (Appeals): After due process, the original authority and the Commissioner (Appeals) upheld the demands, leading to the appeals before the Tribunal.

4. Appellants' Argument: The appellants argued that Rule 16 does not restrict export of goods received under it, citing provisions of CENVAT Credit Rules and a previous decision in their favor.

5. Department's Counter-Argument: The Department contended that goods brought back for repair under Rule 16 must have credit reversed, even if later exported or cleared under exemptions.

6. Tribunal's Decision: The Tribunal disagreed with the lower authorities, citing a previous case where it was held that goods cleared under exemptions are eligible for clearance without additional duty or credit reversal. Consequently, the demands were set aside, and the appeals were allowed with consequential reliefs.