2006 (11) TMI 62 - AT - Central Excise

Tribunal allows appeal on Cenvat credit eligibility for export, emphasizing duty neutrality and rule interpretation.

The Tribunal allowed the appeal in a case concerning the eligibility of excess raw materials, 'continuous cast copper wire rods 8 mm,' for Cenvat credit ... Cenvat/Modvat – Department contended that excess quantity of Continous cast copper were received by appellant not eligible for credit – After looking over the prior decision, authority made decision in favour of appellant Issues:- Interpretation of inputs eligibility for Cenvat credit on excess raw materials procured for export- Application of Circular No. 283/118/96-CX regarding inputs cleared for export under bond- Precedents from Fiat India Ltd. and Vico Industries Limited cases on eligibility for credit on raw materials intended for export- Analysis of Rule 57F(4) and Rule 57F(12) in relation to Cenvat credit utilization and rebate eligibility- Determination of excess raw materials as inputs based on manufacturing purpose and export proceduresInterpretation of Inputs Eligibility for Cenvat Credit:The case involved a dispute over whether excess raw materials procured for export, specifically 'continuous cast copper wire rods 8 mm,' could be considered as inputs eligible for Cenvat credit. The department argued that the excess quantity not intended for immediate use in manufacturing should not qualify as inputs. However, the appellant contended that these raw materials were essential for their production process, making them eligible for credit.Application of Circular No. 283/118/96-CX:The appellant's argument was supported by Circular No. 283/118/96-CX, which addressed the issue of inputs cleared for export under bond and the permissibility of credit. The Circular emphasized the parity between exports under claim for rebate and exports under bond to ensure duty incidence neutrality. The appellant relied on this Circular to support their claim for Cenvat credit on the excess raw materials exported.Precedents from Fiat India Ltd. and Vico Industries Limited Cases:The appellant also cited precedents from cases involving Fiat India Ltd. and Vico Industries Limited, which upheld the eligibility for credit on raw materials intended for export. These cases established that even if raw materials were procured for export purposes and subsequently exported, they could still be considered as inputs eligible for credit.Analysis of Rule 57F(4) and Rule 57F(12):The appellant further argued that Rule 57F(4) and its successor provision Rule 57F(12) permitted the utilization of credit on inputs, especially when used for paying duty on exported products. The provisions, along with the CBEC circular, supported the appellant's claim for rebate on duty paid on the excess raw materials exported.Determining Excess Raw Materials as Inputs for Export:The Tribunal analyzed the concept of inputs in relation to the final product, emphasizing that the excess raw materials procured for export could still be considered as inputs even if not fully utilized in manufacturing. The judgment highlighted that the intention behind the export procedures was to maintain duty neutrality, allowing exporters to claim rebates and credits accordingly.Conclusion:Considering the arguments presented by the appellant, the Tribunal set aside the Commissioner's order and allowed the appeal. The judgment emphasized the importance of interpreting rules to avoid redundancy and ensuring parity between different export procedures to facilitate duty neutrality.