2016 (3) TMI 395 - AT - Central Excise

Export of Capital Goods Allowed Without Duty Payment Under Letter of Undertaking

The Tribunal dismissed the Revenue's appeal against the Order-in-Appeal allowing the clearance of imported used Capital Goods under a letter of ... Reversal of Cenvat credit on export of imported capital goods - export of capital goods under bond - applicability of Board Circular No. 345/2/2000-TRU and erstwhile Rule 57AB - scope of Cenvat Credit Rules regarding removal for exportReversal of Cenvat credit on export of imported capital goods - export of capital goods under bond - applicability of Board Circular No. 345/2/2000-TRU and erstwhile Rule 57AB - scope of Cenvat Credit Rules regarding removal for export - Whether Cenvat credit taken on imported used capital goods must be reversed when those capital goods are cleared for export under bond (UT 1). - HELD THAT: - The Tribunal accepted the Commissioner(Appeals)'s conclusion that export of capital goods under bond is permissible and that there is no requirement to reverse Cenvat credit in the facts of this case. The reasoning rests on the Instruction Manual para 3.4, which expressly permits removal of inputs or capital goods for export under bond and is parimateria to the erstwhile Rule 57AB. Although Rule 57AB has been repealed, the Board Circular No. 345/2/2000 TRU (which refers to Rule 57AB) and the Instruction Manual provision are applicable to the present situation. Further, in the case of importation, countervailing duty to the extent of excise duty would have been recovered on import as if the goods were manufactured in India, which undercuts the department's contention that only goods manufactured in India can be exported under bond without reversal of credit. Consequently, the departmental submission based on Rule 6(6) of the Cenvat Credit Rules, 2004 and the contention that capital goods (on which credit was taken) cannot be cleared under bond was rejected on the basis that the Instruction Manual and the Board Circular govern removal for export in these circumstances. [Paras 5]No reversal of Cenvat credit is required when the imported used capital goods were exported under bond; the Commissioner(Appeals) order allowing the respondent's appeal is upheld.Final Conclusion: The Revenue's appeal is dismissed; the impugned order of the Commissioner(Appeals) setting aside the original order is upheld and there is no requirement to reverse the Cenvat credit on export of the imported used capital goods under bond. Issues:1. Appeal against Order-in-Appeal allowing clearance of imported used Capital Goods under letter of undertaking without duty payment.2. Interpretation of Rule 6(6) of Cenvat Credit Rules, 2004 regarding clearance of capital goods for export.3. Applicability of Board Circular No. 345/2/2000-TRU to the case.4. Export of capital goods under bond as per para 3.4 of Instruction Manual.5. Reversal of Cenvat credit at the time of clearance of imported capital goods for export.Analysis:1. The appeal was filed against the Order-in-Appeal allowing the respondent to clear imported used Capital Goods under a letter of undertaking without payment of duty. The Commissioner (Appeals) set aside the original order, leading to the Revenue's appeal.2. The Revenue argued that Rule 6(6) of the Cenvat Credit Rules, 2004 permits only excisable goods to be removed for export under bond, excluding capital goods. The Board Circular No. 345/2/2000-TRU was deemed inapplicable due to referencing the old Rule 57AB.3. The respondent contended that capital goods can be exported under bond as per para 3.4 of the Instruction Manual, even though Rule 57AB was no longer in force. The duty on exported goods is not chargeable, supporting the permissibility of exporting capital goods under bond.4. The Tribunal analyzed the provisions and found that duty need not be exported with the goods, allowing export under rebate or bond. Para 3.4 of the Instruction Manual explicitly permits the export of inputs or capital goods under bond, similar to the erstwhile Rule 57AB.5. The Ld. Commissioner (Appeals) correctly determined that the Cenvat credit need not be reversed at the time of clearing imported capital goods for export against a UT-1 Undertaking. The Board's Circular No. 345/2/2000-TRU was deemed applicable, and the appeal of the Revenue was dismissed based on the findings of the Commissioner.This detailed analysis of the judgment highlights the key issues involved, the arguments presented by both parties, and the final decision rendered by the Tribunal, providing a comprehensive understanding of the legal aspects considered in the case.