2024 (8) TMI 990 - AT - Central Excise

CENVAT Credit - common input services used in the manufacture of dutiable as well as final products which were exempted (exported) - rebate of duty on export of goods - HELD THAT - On perusal of the impugned order, we find that the issue stands covered by the decision in the case of the appellant's sister concern, M/S. SRI VELAYUTHASWAMY SPINNING MILLS (P) LTD., (UNIT-II) VERSUS THE COMMISSIONER OF G.S.T. CENTRAL EXCISE 2019 (6) TMI 362 - CESTAT CHENNAI . The Tribunal after discussing the issue in detail has held that the demand alleging that the appellant has to pay amount after including the value of export clearances also was set aside. The demand cannot sustain. The impugned order set aside - Appeal allowed.

Summary

Issues:
1. Applicability of Rule 6 (6) (v) of CENVAT Credit Rules, 2004 in case of export of exempted goods without executing a bond.
2. Interpretation of Rule 6 (6) (v) in the context of exemption for excisable goods cleared for export under bond.
3. Analysis of judicial precedents regarding the eligibility of CENVAT credit on input services used in the manufacture of exempted goods that are exported.

Analysis:

The appellant cleared cotton yarn under different duty notifications and utilized cenvat credit for payment of duty on finished products, including exports. The department alleged an erroneous payment by the appellant for input services used in manufacturing exempted goods. The original authority confirmed the demand, leading to an appeal before the Commissioner (Appeals), who upheld the decision. The appellant contended that the demand was based on the absence of executing a bond for exports. The Tribunal referred to a similar case involving the appellant's sister concern and held that the demand for payment including the value of export clearances was not valid.

The Tribunal analyzed Rule 6 (6) (v) of the CENVAT Credit Rules, 2004, which exempts the bar on availing credit on common inputs/input services when exempted goods are cleared for export under bond. Judicial precedents, including the case of M/s. Jolly Board Ltd., supported the view that the execution of a bond for exporting exempted goods is a procedural requirement and does not affect credit eligibility. The Tribunal also referenced decisions in M/s. Lavino Kapur Cottons Pvt. Ltd and M/s. GPI Textiles Ltd, emphasizing that credit on input services for exported exempted goods is permissible under the law to avoid double taxation and maintain international competitiveness.

Based on the discussions and precedents cited, the Tribunal concluded that the appellant was eligible for the credit on input services, and the department's demand for reversal was contrary to the law. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential reliefs. The Tribunal's decision was in line with established legal principles and interpretations of relevant rules and notifications.

In summary, the judgment addressed the correct application of Rule 6 (6) (v) of the CENVAT Credit Rules, 2004 concerning the export of exempted goods under bond, and clarified the eligibility of cenvat credit on input services used in the manufacture of such goods. The analysis of judicial precedents reinforced the appellant's position, leading to the allowance of the appeal and rejection of the department's demand for reversal of credit.