Export of used capital goods under bond permits retention of Cenvat credit and avoids domestic duty liability.

Used capital goods cleared for export under bond or LUT were treated as not liable to domestic duty, even where Cenvat credit had already been availed. The order relied on the principle that exported goods should not bear domestic taxes, and rejected the contention that there was no enabling provision for exporting used capital goods under bond. It also followed the view that the Central Excise Manual permits removal of inputs or capital goods for export under bond, and that reversal of Cenvat credit is not required when such goods are exported.

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Issues: Whether duty was payable on capital goods, after use, cleared for export under bond or LUT despite Cenvat credit having been availed on them.

Analysis: The capital goods were admittedly cleared for export after use. The accepted position applied in the order was that goods exported are not to bear domestic taxes and duties, and the departmental stand that there was no enabling provision to export used capital goods under bond was rejected. The clarification in the Central Excise Manual was relied upon to hold that there is no bar on removal of inputs or capital goods for export under bond. The order also followed the view that export of capital goods under bond is permissible and that Cenvat credit already taken need not be reversed when such goods are exported.

Conclusion: Duty was not payable on the exported capital goods and reversal of Cenvat credit was not required; the appeal succeeded.

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