2018 (10) TMI 219 - AT - Service Tax

Refund of Service tax paid - Transportation of Goods by Road Services - rejection on the ground that the goods manufactured and exported by them were exempted from payment of excise duty by virtue of N/N. 4/2006 CE dated 01.03.2006 and in terms of Rule 6(1) of Cenvat Credit Rules they were barred from availing the cenvat credit. Held that - The Commissioner (Appeals) has rightly held that the respondents are entitled to cenvat credit and there is no provisions contained in Rule 6(1) of the Cenvat Credit Rules when the final product is exempted from Central Excise duty by virtue of Notification 4/2006 CE dated 01.03.2006 - the Commissioner (Appeals) has relied upon various decisions which have consistently held that the assessee is entitled to avail credit of service tax paid on input services when they are producing exempted excisable goods which are chargeable to nil rate of duty. The Hon ble Karnataka High Court in the case of Commissioner of Customs Vs. ANZ International 2008 (6) TMI 155 - KARNATAKA HIGH COURT has held that the provisions of Rule 6 of Cenvat Credit Rules are not applicable when the goods are exported under bond. There is no infirmity in the impugned order passed by the Commissioner (Appeals) based on the decision of the High Court - appeal dismissed - decided against Revenue.

Summary

Issues:
- Eligibility of availing cenvat credit on input services for manufacturing and exporting exempted goods
- Requirement of furnishing bond or Letter of Undertaking for exporting exempted goods

Analysis:
1. Eligibility of availing cenvat credit on input services for manufacturing and exporting exempted goods:
The appeal was filed by the Revenue against the order rejecting a refund claim by the respondents for availing cenvat credit on input services used for manufacturing and exporting Iron Ore Fines. The Assistant Commissioner initially rejected the refund claim citing the exemption from excise duty and the bar in Rule 6 of Cenvat Credit Rules. The Commissioner (Appeals) later held that the respondents were eligible to avail the credit as the goods were exempted and chargeable at a 'nil' rate of duty. The Tribunal agreed with the Commissioner (Appeals) that when producing exempted excisable goods chargeable at 'nil' rate of duty, the respondents were entitled to cenvat credit. Various judicial decisions were cited to support this conclusion, emphasizing that the provisions of Rule 6 were not applicable in such cases. The Tribunal also referred to specific cases where similar principles were upheld by higher courts and the CESTAT, reinforcing the eligibility of availing cenvat credit in such scenarios.

2. Requirement of furnishing bond or Letter of Undertaking for exporting exempted goods:
The Revenue contended that the respondents were not entitled to cenvat credit as they had not furnished a bond while exporting the exempted goods. However, the respondents argued that since the Iron Ore Fines were classified as excisable goods and cleared at a 'nil' rate of duty under a specific exemption notification, there was no need for a bond or registration certificate under Rule 9 of Central Excise Rules. The Commissioner (Appeals) agreed with this reasoning, which was supported by various decisions and notifications. The Tribunal upheld this finding, emphasizing that when goods are exported under bond and are exempted from duty, the provisions of Rule 6 do not apply. The Tribunal relied on past judgments and legal precedents to support this conclusion, ultimately dismissing the Revenue's appeal and disposing of the cross objection accordingly.

In conclusion, the Tribunal affirmed the Commissioner (Appeals)'s decision, holding that the respondents were eligible to avail cenvat credit on input services for manufacturing and exporting exempted goods chargeable at a 'nil' rate of duty. The judgment highlighted the importance of specific exemptions and export procedures in determining the eligibility for cenvat credit, ultimately dismissing the Revenue's appeal and cross objection.