Reversal of Cenvat credit when Capital goods were exported under bond without payment of duty for repairs.

PJ/Case Laws/2012-13/1199

Case:- Grasim Ltd Versus Commissioner of Central Excise, Indore

Citation:-2012 (279) E. L. T. 440 (Tri. – Del)

Issue:- Reversal of Cenvat credit when Capital goods were exported under bond without payment of duty for repairs.

Brief Facts:- The appellant are manufacturer of various products such as caustic soda, liquid chlorine, bleaching powder, hydrogen etc. They had imported some capital goods and had taken Cenvat credit of additional custom duty in respect of the same. Subsequently on account of defect, the capital goods were exported to the supplier without paying any duty under LUT-I. There is no dispute that the goods have been returned after the necessary repairs. Department is of the view that at the time of sending, the Cenvat credit avails goods abroad for repair, the Cenvat credit taken in respect of same should have been reversed. It is on this basis that the Assistant Commissioner vide Order-in Original dated 29.12.2008 confirmed the Cenvat credit demand of Rs. 2,03,495/- along with interest and imposed penalty of equal amount. On appeal to Commissioner (Appeals), this order of the Assistant Commissioner was upheld. Against this order, the present appeal has been filed.

Appellant Contention:-The Appellant pleaded that the capital goods in respect of which Cenvat Credit had been taken have been exported out of India to the supplier without payment of duty under bond, that the goods had been sent abroad for repairs, that since the goods had been exported under bond without payment of duty, Cenvat credit was not required to be reversed, that there are Board's Instructions No. 345/2000. The Tribunal in the case of Zydex Industries v. C.C.E., Vadodara reported in 2007 (219) E.L.T. 602 (Tri.-Ahmd.) has held that in such cases, the Cenvat credit is not required to be reversed and that in view of this, the impugned order is not correct.

Respondent Contention:-The Respondent pleaded that the impugned order by reiterating the findings of the Commissioner (Appeals) and emphasized that the Board's instructions dated 29.08.2000were in respect of Rule 1 of the then Rule 57AB of Central Excise Rules, 1944 and the same is not applicable to the present provisions regarding Cenvat credit. He also emphasized that the provisions of Rule 6(6) of Cenvat Credit Rules regarding non-reversal of Cenvat credit in respect of goods exported under bond are applicable in respect of the goods manufactured by assessee while this is not so, in this case. He therefore pleaded that there is no infirmity in the impugned order.

Reasoning of Judgment:- The Tribunal held that at the time of installation of imported goods in the factory, Cenvat credit of additional custom duty paid have been taken. As per the provisions of the Cenvat Credit Rules, if such Cenvat credit availed capital goods are cleared as such, i.e., as capital goods, an amount as prescribed in the Rules is required to be paid. But this provision is in respect of the clearances to domestic buyers. In this case, the capital goods had been exported to the supplier for the purpose of repairs and the same had been exported under bond. Further Tribunal held that, the provisions of Rule 6(6) of Cenvat Credit Rules would be applicable in such cases also where some Cenveted capital goods are cleared for export under bond without payment of duty and in such cases, the Cenvat credit would not require to be reversed. In terms of Board's Circular, Cenvat credit was not required to be reversed. Moreover, I also find that as observed in the Stay Order No. 423/2010-SM, passed in this matter, the goods have since been re-imported. In view of this position, in my view, there would be no justification for reversal of Cenvat credit. In view of this, the impugned order is not sustainable.

Decision:- Appeal allowed.

Comment:-This is very important decisions wherein it is held that when the capital goods are exported then there is no need to reverse the cenvat credit as per provisions of Rule 6(6) of CCR, 2004.

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PJ/Case Laws/2012-13/1199

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