Tribunal rules in favor of appellant on classification of bought out parts as machinery for export

Issues: Whether CENVAT credit taken on bought out parts cleared along with machinery exported under claim for rebate was inadmissible, and whether the demand of duty, interest and penalty could be sustained.

Analysis: The bought out parts were cleared as part of complete machinery, their cost formed part of the assessable value, and the jurisdictional Assistant Commissioner had already sanctioned rebate treating the exported goods as machinery. The Tribunal also relied on the earlier classification of the goods as complete machinery, the departmental circular permitting export of inputs cleared as such under rebate, and the principle that where the credit availed is exactly offset by duty paid on clearance, the situation is revenue neutral. The authorities relied on by the Department were found inapplicable to the facts of the case.

Conclusion: The assessee was entitled to the CENVAT credit and the demand for reversal, with interest and penalty, was not sustainable.

Final Conclusion: The appeal succeeded and the impugned order was set aside.

Ratio Decidendi: Where bought out parts are cleared as part of the exported complete machinery and duty is discharged on their value, denial of CENVAT credit and consequential demand is not justified, particularly when the transaction is revenue neutral and export rebate has been allowed.