Tribunal grants CENVAT credit for manufacturing process on exported goods

The Tribunal allowed the appeal, setting aside the Commissioner (Appeals) order denying CENVAT credit to the appellant for exporting bought out items under bond. The Tribunal held that re-packing of goods from bulk to retail packs constituted a manufacturing process, entitling the appellant to the credit under Rule 16 of the Central Excise Rules. Despite the Commissioner (Appeals) finding no evidence of manufacturing activity, the Tribunal accepted the appellant's documentation showing re-packing had taken place, establishing their eligibility for the credit.

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Issues: Denial of CENVAT credit on bought out items exported under bond.

In this case, the appellant exported chemicals falling under Chapter 28 of the Central Excise Tariff Act, 1985 and availed CENVAT credit against the export of bought out items Nubifer under bond without payment of duty. However, the credit was denied by the adjudicating authority and confirmed by the Commissioner (Appeals) on the grounds that the goods did not qualify as inputs under Rule 2K of the Central Excise Rules, 2004. The appellant contended that the denial of credit was irregular citing Rule 16 of the Central Excise Rules and CBEC Circular No. 283/117/96-CX, which clarified that if inputs are exported as such, CENVAT credit is available to the assessee. The appellant also relied on a decision of CESTAT, Principal Bench, New Delhi to support their argument that finished goods bought to the factory and exported on payment of duty without any process are eligible for credit. They emphasized that re-packing from bulk to retail packs amounts to manufacture as per Chapter 28 Note No. 9, entitling them to CENVAT credit. The appellant challenged the legality of the Commissioner (Appeals) order before the forum.

During the hearing, the appellant's counsel argued that the exported goods were not disputed, but the denial of CENVAT credit was based on the lack of proof of manufacturing activity. On the other hand, the Authorised Representative for the respondent-department supported the Commissioner (Appeals) order, stating that the appellant failed to provide evidence that the exported goods were re-packed before export. The Tribunal noted that there was no dispute regarding the export of products and that the appellant had submitted proof of export. The Commissioner (Appeals) rejected the appeal on the grounds that the appellant could not establish that the bought out items underwent any manufacturing process and that the circular cited by the appellant did not apply as it pertained to inputs cleared as such, not finished goods. However, the Tribunal held that Rule 16 allows for the availment of credits on export of bought out items without the need to establish manufacturing. The Tribunal emphasized that the appellant had demonstrated through invoices and export documents that re-packing had occurred, making them eligible for CENVAT credit. Therefore, the appeal was allowed, and the Commissioner (Appeals) order was set aside.

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