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Issues: (i) Whether the value of clearances of exempted goods exported under Notification No. 30/2004-C.E. had to be included for reversal of CENVAT credit when the assessee had availed credit only on input services and not on inputs; (ii) Whether the turnover of yarn waste cleared without payment of duty had to be included while computing the proportionate credit reversal.
Issue (i): Whether the value of clearances of exempted goods exported under Notification No. 30/2004-C.E. had to be included for reversal of CENVAT credit when the assessee had availed credit only on input services and not on inputs.
Analysis: Rule 6(6)(v) of the CENVAT Credit Rules, 2004 excludes exported clearances of excisable goods removed without payment of duty from the restriction in Rule 6(1). The bar under the exemption notification was only against credit on inputs, whereas the assessee had taken credit on input services. The requirement of bond was treated as procedural, and the export of exempted goods did not extinguish eligibility to credit on inputs or input services used in manufacture. The cited authorities supported the view that export of exempted goods does not justify denial of credit merely because the goods were otherwise exempt.
Conclusion: The issue was decided in favour of the assessee.
Issue (ii): Whether the turnover of yarn waste cleared without payment of duty had to be included while computing the proportionate credit reversal.
Analysis: The departmental instructions recognised that CENVAT credit is admissible in respect of the amount of inputs contained in waste, refuse or by-product. The waste was not consciously manufactured final goods but only refuse arising in the manufacturing process. On that basis, credit attributable to inputs contained in waste could not be denied or required to be reversed.
Conclusion: The issue was decided in favour of the assessee.
Final Conclusion: The additions made by the Department for export clearances and yarn waste were not sustainable, and the impugned order was set aside to that extent while the remanded job-work issue remained undisturbed.
Ratio Decidendi: Export of exempted goods does not by itself bar CENVAT credit on input services, and inputs contained in waste, refuse or by-product remain credit-eligible for the purpose of reversal computation.
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