Reversal of Cenvat credit before use counts as non-availment, preserving DFIA benefits under export policy.

Reversal of Cenvat credit before utilisation, together with interest, is treated as non-availment of the credit for para 4.2.6 of the Foreign Trade Policy, 2009-2014. On that basis, DFIA benefits cannot be denied merely because the exporter had initially availed the credit on inputs used in manufacture of export goods, where the credit was fully reversed before use. The Bombay High Court applied the principle that credit reversed before utilisation stands on the same footing as credit not taken, and held that the policy's requirement that the Cenvat facility not be availed was satisfied.

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Issues: Whether, for the purpose of para 4.2.6 of the Foreign Trade Policy, 2009-2014, Cenvat credit availed on inputs used in manufacture of export goods is to be treated as not availed when such credit is reversed before utilisation with interest, so that benefits on transfer of DFIA cannot be denied.

Analysis: The policy permits transferability of DFIA once export obligation is fulfilled, while providing that exemption from additional customs duty or excise duty remains available where Cenvat facility has not been availed. The Court relied on the principle that reversal of credit before utilisation is equivalent to not having taken the credit. It held that the language of para 4.2.6 is not materially different from the provisions considered by the Supreme Court, and the same principle applies where the credit is reversed or repaid with interest before use.

Conclusion: Reversal of Cenvat credit before its utilisation amounts to non-availment of credit, and the DFIA benefits under para 4.2.6 cannot be denied on that basis.

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