Cenvat credit on capital goods exported under bond for repairs need not be reversed when the goods are re-imported.

Cenvat credit on imported capital goods need not be reversed when the goods are exported under bond for repairs and later re-imported. The Tribunal applied Rule 6(6) of the Cenvat Credit Rules, 2004 to such export clearances and relied on the Board circular dated 29.08.2000 to hold that sending the goods abroad for repair did not justify reversal of credit. On that basis, the demand, interest and penalty were unsustainable.

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Issues: Whether Cenvat credit taken on imported capital goods was required to be reversed when the capital goods were exported to the supplier under bond for repairs and later re-imported.

Analysis: The capital goods on which additional customs duty credit had been availed were sent outside India for repairs under bond without payment of duty. The Tribunal held that Rule 6(6) of the Cenvat Credit Rules, 2004 applied to such export clearances as well, and that the Board circular dated 29.08.2000 supported non-reversal of credit in such a situation. Since the goods were subsequently re-imported, there was no justification to demand reversal of the credit.

Conclusion: Cenvat credit was not required to be reversed, and the demand, interest and penalty were unsustainable.

Ratio Decidendi: Where capital goods on which Cenvat credit has been availed are exported under bond for repairs, credit is not required to be reversed merely because the goods are sent abroad and later returned.

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