CENVAT credit on exported goods upheld despite domestic MRP-based exemption and bond clearance for biscuits

CENVAT credit is available on inputs and input services used in biscuits exported under bond, even though the same products may be exempt for domestic sale on an MRP or Retail Sales Price basis. The MRP regime applies only to goods intended for sale in India and has no extraterritorial operation for exports, so a domestic exemption linked to retail sale cannot be extended to export clearances. Rule 6(6)(v) of the CENVAT Credit Rules, 2004 preserves credit for goods exported, and clearance under bond under Rule 19 of the Central Excise Rules, 2002 supports that position. The duty demand and penalty were therefore unsustainable.

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Issues: Whether CENVAT credit was admissible on inputs and input services used in the manufacture of biscuits exported under bond, despite the same goods being exempt when sold in the market on the basis of Retail Sales Price and MRP-based exemption.

Analysis: The requirement of affixing MRP under the Standards of Weights and Measures regime operates only for goods intended for sale in India and has no extraterritorial application to exported goods. An exemption tied to Retail Sales Price therefore applies only to domestic sales and cannot be extended to export clearances. In addition, Rule 6(6)(v) of the CENVAT Credit Rules, 2004 permits credit on inputs and input services used in exported goods even where those goods are exempt in the domestic market. The export clearance under bond under Rule 19 of the Central Excise Rules, 2002 also supports the availability of credit.

Conclusion: CENVAT credit was admissible on the inputs and input services used in the exported biscuits, and the duty demand and corresponding penalty were not sustainable.

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