Cenvat credit on export-related input services cannot be denied merely because exempt goods were cleared without bond or letter of undertaking.

Cenvat credit and refund on input services used for export of goods cannot be denied merely because the final products were cleared under exemption without a bond or letter of undertaking. Applying the export exception under the Cenvat Credit Rules, the Tribunal treated exports as outside the embargo in Rule 6 and accepted that the scheme is intended to avoid indirect taxation on exported goods. On that basis, the departmental view denying credit and refund was unsustainable, and the assessee's credit and refund claims were upheld.

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Issues: Whether Cenvat credit and consequential refund could be denied on services used for export of goods merely because the final products were cleared under exemption without a bond or letter of undertaking.

Analysis: The appeals turned on the interplay of the Cenvat Credit Rules and the export exception. The factual position accepted by the Tribunal was that the credit and refund claims related to services used for export of goods. The Tribunal applied the settled principle that the Cenvat scheme is intended to prevent indirect taxation on exports and that the embargo under Rule 6 does not operate where the goods are exported, as the exception clause protects such cases. Relying on the ratio that the expression governing the export exception is broad enough to cover export goods and that refund/credit cannot be denied merely because the goods were cleared under exemption, the Tribunal held the departmental view to be unsustainable.

Conclusion: The assessee was entitled to the Cenvat credit and refund claims, and the orders denying the same were set aside.

Ratio Decidendi: Cenvat credit and refund cannot be denied on inputs or input services used for export of goods merely because the final products were cleared under exemption, where the export exception under the Cenvat Credit Rules applies.

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