CENVAT credit on imported capital goods need not be reversed when re-exported under bond without duty.

CENVAT credit on imported capital goods need not be reversed when the goods are later re-exported under bond without payment of duty. The analysis relies on a Board circular stating that exports under bond attract nil excise duty and that such removal for export is not barred by the relevant explanation to Rule 57AB(1)(b). It also follows earlier tribunal decisions holding that capital goods exported without duty do not trigger reversal of credit, including where the goods are re-exported after credit has been taken.

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

Analysis: The Board circular clarified that where inputs or capital goods are exported under bond, the appropriate duty of excise is nil and there is no bar to removal of such goods for export within the scope of the explanation to Rule 57AB(1)(b). The same view had already been taken in earlier tribunal decisions holding that capital goods exported without payment of duty do not require reversal of credit, including where the goods are re-exported after credit has been taken. The present case followed that consistent view and the applicable circular.

Conclusion: The credit was not required to be reversed, and the revenue appeal failed.

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