Cenvat credit on capital goods exported under bond need not be reversed when duty-free export is permitted.

Cenvat credit on capital goods was not required to be reversed when the goods were exported under bond without payment of duty. The export scheme permitted clearance for export either on rebate or under bond, and the Board's circulars, together with the Tribunal's earlier view, recognised that credit taken on inputs or capital goods did not have to be reversed merely because the goods were exported. Applying that reasoning, the Tribunal rejected the Revenue's reversal demand and upheld the appellant's entitlement to retain the credit.

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Issues: Whether Cenvat credit taken on capital goods was required to be reversed when the goods were subsequently exported under bond without payment of duty.

Analysis: The capital goods were admittedly exported. The applicable export scheme permitted export of goods either on rebate of duty or under bond without payment of duty. The Board's circulars and the Tribunal's earlier view recognized that inputs or capital goods on which credit had been taken could be cleared for export under bond without requiring reversal of credit. The Tribunal followed the same reasoning and held that the clearance for export did not attract the reversal obligation urged by the Revenue.

Conclusion: The appellant was not required to reverse the Cenvat credit taken on the capital goods exported under bond.

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