Eligibility of credit in respect of packing material used in exported goods.

PJ/Case law/2013-14/1917

Case:- MADURA COATS PVT. LTD. Vs COMMISSIONER OF CENTRAL EXCISE, MADURAI

Citation:-2013 (293) E.L.T. 371 (Tri. - Chennai)

Issue:- Eligibility of credit in respect of packing material used in exported goods.

Brief facts:-The appellants had exported ‘Multi Folded Cotton Yarn’ on payment of duty. They had claimed input duty credit in respect of packing material which had been denied by the department on the ground that the exported material is otherwise duty-free.The amount involved in the case was only Rs. 19,713/-. On the one hand, the appellants had filed an application for early hearing of the appeal and on the other hand they had sought for adjournment on the ground that their authorized representative based in Mumbai had to come for arguing the appeal, though the same involves a petty amount of Rs. 19,713.

Appellant’s Contentions:- The appellant pleaded that the input credit with respect to the packing material should be allowed as the intention of the government is to ultimately made the exported goods duty free so that they are competitive in the international market.

Respondents Contentions:- The respondent had relied on the contentions of the lower authorities.

Reasons of judgment:-The Hon’ble judge affirmed to the fact that it was the undisputed policy of the Government not to burden the export goods with domestic taxes as had been noted in various decisions of the Tribunal. The reasons were obvious. The government wants to make domestically produced goods, when exported to foreign market, to become competitive. Secondly, no country wants to export the domestic taxes meant to be levied on domestic consumption of goods and services. Each country either exempts such taxes in respect of export goods, including taxes relating to inputs used in the export goods, or there are alternative schemes for providing rebate, drawback of duties suffered by export goods. India is no exception. There are also schemes making available duty free goods and services for export production.
As such, allowing of input duty credit would free the export goods from domestic taxes. Hence, the impugned order was set aside and the appeal was allowed.

Decision:-Appeal was allowed.

Comment:- The analogy drawn from the case is that as ultimately the government wants the exported goods to be competitive in the international market and consequently the exported goods should not be overburdened with domestic taxes. Therefore, the credit on packing material used in exported goods was allowed.

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PJ/Case law/2013-14/1917

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