Tribunal allows EOU's appeal for Cenvat credit denial on export goods, emphasizing export competitiveness

The Tribunal ruled in favor of the appellant, a 100% EOU manufacturing absorbent cotton, allowing their appeal against the disallowance of Cenvat credit amounting to &8377;1,01,23,236/- along with penalty under Rule 15(3) of Cenvat Credit Rules, 2004. The dispute arose from the denial of credit by the department due to the appellant availing benefits under an Exemption Notification while clearing goods for export without separate accounts. The Tribunal emphasized the availability of Cenvat credit for exported final products, regardless of exemption status, citing relevant case law and legislative intent to prevent double taxation and promote export competitiveness.

---

---

Issues involved: Appeal against disallowance of Cenvat credit u/s Rule 15(3) of Cenvat Credit Rules, 2004.

Summary:
The appellant, a 100% EOU manufacturing absorbent cotton, appealed against disallowance of Cenvat credit of &8377; 1,01,23,236/- along with penalty u/s Rule 15(3) of Cenvat Credit Rules, 2004. The dispute arose as the department denied the credit based on the appellant availing the benefit of Exemption Notification No. 30/2004-C.E. while clearing goods for export without maintaining separate accounts as required by Rule 6(1) of the Cenvat Credit Rules. The appellant contended that being a 100% EOU, they were eligible for Cenvat credit on service tax paid for manufacturing their final product, absorbent cotton, cleared for export under bond. The department argued that since the goods were exempted (nil rate), Rule 6(1) applied, disallowing the credit. The Tribunal held in favor of the appellant, citing precedents emphasizing the availability of Cenvat credit for exported final products irrespective of exemption status.

The Tribunal noted the appellant's status as a 100% EOU and their compliance with Warehouse Regulations. The appellant had executed a general bond for export, and the dispute centered on the denial of Cenvat credit on input services used in manufacturing their export goods. The department's denial was based on the appellant availing benefits under Notification 30/2004, leading to a conflict with Rule 6(1) of the Cenvat Credit Rules. However, the Tribunal emphasized the legislative intent behind Cenvat credit to prevent double taxation and promote export competitiveness, allowing credit for exported goods under Rule 6(6)(v). Citing relevant case law, including the Bombay High Court decision in Repro India Ltd. v. UOI, the Tribunal held that the appellant was entitled to Cenvat credit for inputs used in manufacturing exported final products, overturning the Commissioner's order and allowing the appeal.

In conclusion, the Tribunal set aside the Commissioner's order, ruling in favor of the appellant's eligibility for Cenvat credit on service tax paid for manufacturing goods cleared for export under bond.

---