Duty not chargeable on exported capital goods with Cenvat credit. Precedents & law support appellant.

The Tribunal held that duty is not chargeable on capital goods cleared for export after use, on which Cenvat credit was availed. Relying on precedents like Essel Propack Ltd and Glass and Ceramic Decorators, it was established that duty need not be paid on such clearances under bond/Letter of Undertaking. The decision set aside the order demanding duty, ruling in favor of the appellant based on provisions in the Central Excise Manual and consistent case law interpretations.

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Issues:
Whether duty is payable on capital goods cleared for exports after use on which Cenvat credit was availed.

Analysis:
The issue in this case revolves around the liability of duty on capital goods cleared for exports after being used and on which Cenvat credit was availed. The appellant argued that since the capital goods were cleared for export under bond/Letter of Undertaking (LUT), no duty is payable. The appellant relied on various judgments and Chapter 5 of the Central Excise Manual, which allows clearance of capital goods under bond. On the contrary, the Revenue contended that there is no provision in Cenvat credit rules or Central Excise rules to clear used capital goods for exports under bond/LUT, thus asserting that duty is payable on such clearances even for exports.

Upon careful consideration of both sides' submissions and perusal of the record, it was observed that the capital goods, used for 3 to 4 years, were indeed cleared for export. It was noted that when goods are cleared for exports, the taxes and duties are not exported. The Tribunal referred to the instructions manual, specifically para 3.4 of Chapter 5, which allows a manufacturer to remove inputs or capital goods for export under bond. This issue had been addressed in various case laws, including Essel Propack Ltd, Glass and Ceramic Decorators, and Commissioner of Central Excise, Pune-II Vs. Suessan Asia Pvt Ltd, where it was consistently held that duty is not payable on capital goods cleared for export.

In the case of Essel Propack Ltd, it was highlighted that manufacturers can export goods under bond without payment of duty, and the duty payable is nil in such scenarios. Similarly, in Glass and Ceramic Decorators, it was reiterated that manufacturers can clear inputs or capital goods for export under bond without payment of duty. The Tribunal's decision in these cases set a precedent that Cenvat credit on capital goods exported does not need to be reversed. The same principle was applied in Suessan Asia Pvt Ltd, where it was clarified that duty need not be reversed at the time of clearance of imported and used capital goods for export against UT-1 Undertaking.

Therefore, based on the consistent rulings in the aforementioned cases and the provisions of the Central Excise Manual, it was concluded that duty is not chargeable on capital goods cleared for export. The impugned order demanding duty was set aside, and the appeal was allowed in favor of the appellant.

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