2005 (9) TMI 461 - Commissioner - Central Excise

Refund of Cenvat credit - Export of goods - Cenvat/Modvat - Dutiable goods - Bond/LUT for export - Object of

Summary

Issues Involved:
(i) Applicability of sub-rule 5(vi) of Rule 6 of the CCR, 2002.
(ii) Treatment of goods attracting NIL rate of duty/exempted goods cleared for export under Bond/LUT.
(iii) Admissibility of refund of Cenvat credit lying unutilized taken on the inputs in case of exports.

Detailed Analysis:

Issue (i): Applicability of sub-rule 5(vi) of Rule 6 of the CCR, 2002

The adjudicating authority held that sub-rule (5)(vi) of Rule 6 of the CCR, 2002 is not applicable because the exports made by the appellants cannot be treated as 'Exports under Bond' since the finished leather attracts Nil rate of duty, and thus, no Bond/LUT was required. However, upon examining Rule 6, it is clear that sub-rule (5) specifically includes exempted goods. The provision of sub-rule (5)(vi) states that exempted goods cleared for export under Bond are also covered. The appellants' contention that Bond/LUT is required even for exempted goods is supported by the wording of the rule. The legislative intent behind sub-rule (5) is to provide relief for exempted goods, and thus, the case is covered under sub-rule 5(vi) of Rule 6 of the CCR, 2002.

Issue (ii): Treatment of goods attracting NIL rate of duty/exempted goods cleared for export under Bond/LUT

The adjudicating authority emphasized that the exports cannot be treated as 'Exports under Bond' due to the Nil rate of duty, and thus, no Bond/LUT was required. However, Bond/LUT serves as a collateral security to ensure compliance with statutory provisions until the goods are exported. Once the exports are established through documents like ARE1, Shipping Bill/Bill of lading, the role of Bond/LUT is complete. The CBEC supplementary instructions also require a Bond/LUT to be filed by a manufacturer, regardless of the product's duty status. Therefore, the goods cleared by the appellants for exports should be treated as 'cleared under Bond' and are covered within the provisions of Rule 6(5)(vi) of the CCR, 2002.

Issue (iii): Admissibility of refund of Cenvat credit lying unutilized taken on the inputs in case of exports

The object of Rule 5 of the CCR, 2002 is to compensate exporters who cannot utilize the credit taken on inputs. The adjudicating authority's finding that refund is admissible only if the final product attracts some duty fails to recognize that the government policy aims to keep exports free from all duties. Various schemes provide incentives for duty paid on inputs used in export goods, regardless of the duty status of the final product. The CBEC Circular No. 220/554/96-CX also supports the cash refund of accumulated credit as an incentive to exporters. Therefore, the refund of Cenvat credit is admissible in the case of exports, and the adjudicating authority's interpretation is incorrect.

Conclusion:

The judgment concludes that the case is covered under sub-rule 5(vi) of Rule 6 of the CCR, 2002, which includes exempted goods cleared for export under Bond. The goods cleared by the appellants for exports are to be treated as 'cleared under Bond,' and the refund of Cenvat credit lying unutilized is admissible. The adjudicating authority's order is set aside, and the appeal is allowed with consequential relief.