Export-type clearance to a 100% EOU barred Cenvat credit reversal on inputs cleared under CT-3 certificates.

Clearance of inputs to a 100% EOU against CT-3 certificates was treated as an export-type clearance, so the removal-as-such provision under the Cenvat Credit Rules did not require reversal of credit already taken. The Tribunal relied on the settled view that such supplies to a 100% EOU are not ordinary domestic removals for denial of credit, and therefore the demand for reversal was unsustainable. The impugned order was set aside and consequential relief followed.

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Issues: Whether Cenvat credit was required to be reversed when inputs were cleared to a 100% EOU against CT-3 certificates.

Analysis: The inputs were removed to a 100% EOU under CT-3 certificates issued under Notification No. 22/2003-CE. The dispute was whether such clearances attracted Rule 3(4) of the Cenvat Credit Rules, 2002, as removals of inputs as such. Relying on the settled view that clearances to a 100% EOU are to be treated as export clearances, and following the earlier judicial view that such transactions do not warrant denial of credit, the Tribunal held that the credit could not be denied. The reasoning also drew support from the principle that the transaction was covered by the export-type clearance mechanism and did not justify the demand raised.

Conclusion: Reversal of Cenvat credit was not required and the demand was unsustainable.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief to the appellant.

Ratio Decidendi: Clearance of inputs to a 100% EOU against CT-3 certificates is to be treated as export clearance, so Cenvat credit already taken on such inputs is not liable to reversal under the removal-as-such provision.

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