Cenvat credit and export conditions: foreign exchange realisation and prototype testing objections failed at the stay stage.

Cenvat credit was examined against two revenue objections at the stay stage. First, export of vehicles under bond had been completed, and the absence of foreign exchange realisation was not shown to be a condition for availing credit under the Cenvat Credit Rules; the objection therefore lacked prima facie merit and was not accepted. Second, credit was sought to be denied because inputs were used in a prototype vehicle sent abroad for testing, but the Tribunal noted that the precedent relied on by the Commissioner had been reversed by the Supreme Court; this objection was also not accepted. On that basis, unconditional stay was granted by dispensing with pre-deposit.

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Issues: (i) whether Cenvat credit could be denied at the stay stage on the ground that export of the vehicles was completed under bond but foreign exchange had not been realised; (ii) whether Cenvat credit could be denied on the ground that the inputs were used in a prototype vehicle sent for testing abroad.

Issue (i): whether Cenvat credit could be denied at the stay stage on the ground that export of the vehicles was completed under bond but foreign exchange had not been realised.

Analysis: Export under Rule 19 stood completed and there was no dispute on that aspect. The absence of receipt of foreign exchange was not shown to be a condition under the Cenvat Credit Rules for availment of credit. On that basis, the revenue's objection did not disclose prima facie merit.

Conclusion: The objection based on non-realisation of foreign exchange was not accepted.

Issue (ii): whether Cenvat credit could be denied on the ground that the inputs were used in a prototype vehicle sent for testing abroad.

Analysis: The Commissioner's reliance on earlier Tribunal decisions was weakened because the precedent relied upon had since been reversed by the Supreme Court. The reversal removed the basis for treating the prototype-testing situation as a prima facie ground to deny credit.

Conclusion: The objection based on prototype testing was not accepted.

Final Conclusion: The assessee was found entitled to unconditional stay by dispensing with pre-deposit, and the denial of credit was held to lack prima facie support at this stage.

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