2009 (6) TMI 440 - AT - Central Excise

Cenvat Credit- Export o goods- The assessee was engaged in the manufacture of Psyllium Seed Husk and was exporting the entire products. It claimed refund of service tax paid on services used in the manufacture of exported goods cleared under bond. The original authority rejected the refund claim of the assessee on the ground that the goods of the assessee were exempted from duty and therefore the refund claim was unsustainable. On appeal the Commissioner(Appeals) upheld the action of the original authority. But the Tribunal in the light of the decision of CCE v. Drish Shoes Ltd. 2009 (90) RLT 686 (Delhi - CESTAT); held that-inputs used in manufacture of exempted final product which is exported input credit and its refund are admissible under rule 5 and 6 of Cenvat Credit Rule 2004 thus the impugned order is set-aside and appeals are allowed with consequential relief.

Summary

Issues:
Claim for rebate of service tax and CESS paid on taxable services exported under Export of Services Rules, 2005. Refund claim under rule 5 of Cenvat Credit Rules, 2004. Applicability of rule 6(6) of Cenvat Credit Rules, 2004 on exported goods cleared under bond. Interpretation of rule 6(6) in the context of exempted and dutiable goods exported under bond.

Analysis:
The appellants were manufacturing Psyllium Seed Husk and exporting the products, filing rebate claims for service tax and CESS paid on taxable services exported. A show-cause notice was issued challenging the rebate claim on the grounds of no service export. The appellants then sought to treat the claim as a refund under rule 5 of Cenvat Credit Rules, 2004, for service tax paid on services used in manufacturing exported goods cleared under bond. The original authority and Commissioner (Appeals) rejected the refund claim, citing exemption from duty on exported goods.

The appellant's counsel argued that the findings against refund were contrary to various decisions of the High Court and Tribunal, referencing specific cases. The Departmental Representative supported the Commissioner's findings, noting the exemption of exported goods from duty, thus no bond requirement. The Judicial Member analyzed rule 6(1) and 6(6) of Cenvat Credit Rules, 2004, highlighting that credit is disallowed on inputs for exempted goods, but rule 6(6) exempts exported goods cleared under bond from this restriction.

Referring to the decision in Repro India Ltd. case, the Judicial Member emphasized that rule 6(6) applies to goods wholly exempt from duty, clarifying the term 'excisable goods' to include both dutiable and exempted goods exported under bond. The Tribunal's decision in Drish Shoes Ltd. case supported inputs credit and refund for manufacturing exempted final products exported. The Judicial Member concluded that since the goods were exported without duty liability, in line with previous court and Tribunal decisions, the impugned order was set aside, allowing the appeals with consequential relief.