2017 (8) TMI 1099 - AT - Central Excise

Capital goods cleared for export - whether duty is payable on the capital goods cleared for exports after use on which Cenvat credit was availed? - Held that - capital goods after use for 3 to 4 years have been cleared for export. Any goods which cleared for exports the taxes and duties are not exported. In the present case duty has been demanded in respect of capital goods which is admittedly exported therefore duty is not payable - reliance placed in the case of Commissioner of Central Excise Pune-II Versus M/s. Suessan Asia Pvt Ltd Satara 2016 (3) TMI 395 - CESTAT MUMBAI where it was held that The contention of the department that a manufacturer can export only the goods manufactured in India under bond without payment of duty is not tanable in view of the fact that while importation of Capital goods the Countravalling duty to the extent of Excise duty as if the goods have been manufactured in India had already been recovered - no duty is chargeable on the capital goods cleared for export - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether duty is payable on capital goods cleared for exports after use on which Cenvat credit was availed.

Analysis:
The issue in this case revolves around the liability of duty on capital goods cleared for exports after being used and on which Cenvat credit was availed. The appellant argued that since the capital goods were cleared for export under bond/Letter of Undertaking (LUT), no duty is payable. The appellant relied on various judgments and Chapter 5 of the Central Excise Manual, which allows clearance of capital goods under bond. On the contrary, the Revenue contended that there is no provision in Cenvat credit rules or Central Excise rules to clear used capital goods for exports under bond/LUT, thus asserting that duty is payable on such clearances even for exports.

Upon careful consideration of both sides' submissions and perusal of the record, it was observed that the capital goods, used for 3 to 4 years, were indeed cleared for export. It was noted that when goods are cleared for exports, the taxes and duties are not exported. The Tribunal referred to the instructions manual, specifically para 3.4 of Chapter 5, which allows a manufacturer to remove inputs or capital goods for export under bond. This issue had been addressed in various case laws, including Essel Propack Ltd, Glass and Ceramic Decorators, and Commissioner of Central Excise, Pune-II Vs. Suessan Asia Pvt Ltd, where it was consistently held that duty is not payable on capital goods cleared for export.

In the case of Essel Propack Ltd, it was highlighted that manufacturers can export goods under bond without payment of duty, and the duty payable is nil in such scenarios. Similarly, in Glass and Ceramic Decorators, it was reiterated that manufacturers can clear inputs or capital goods for export under bond without payment of duty. The Tribunal's decision in these cases set a precedent that Cenvat credit on capital goods exported does not need to be reversed. The same principle was applied in Suessan Asia Pvt Ltd, where it was clarified that duty need not be reversed at the time of clearance of imported and used capital goods for export against UT-1 Undertaking.

Therefore, based on the consistent rulings in the aforementioned cases and the provisions of the Central Excise Manual, it was concluded that duty is not chargeable on capital goods cleared for export. The impugned order demanding duty was set aside, and the appeal was allowed in favor of the appellant.