CENVAT credit reversal not required under Rule 6(6) for International Competitive Bidding contracts with duty exemptions

CESTAT Ahmedabad held that CENVAT credit need not be reversed under Rule 6(6) of CCR, 2004 when goods are supplied for contracts obtained through International Competitive Bidding where imports are exempted from basic and additional customs duty. However, the appellant failed to establish that all goods supplied from their Maneja plant to Savli plant were exclusively for the DMRC contract obtained under International Competitive Bidding. The matter was remanded to the original adjudicating authority to allow the appellant opportunity to provide evidence proving all supplied goods were for the DMRC contract, enabling them to claim Rule 6(6) benefits if substantiated.

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Issues:
Denial of Cenvat Credit availed by the appellant for supplies made under International Competitive Bidding.

Analysis:
The appellant, a sub-contractor manufacturing electric locomotive parts and Metro Railway coaches, appealed against the denial of Cenvat Credit. They were awarded a contract by Delhi Metro Rail Corporation Ltd. for supply of Metro Railway coaches and parts, exempted by the Ministry of Finance. The appellant claimed exemption under Notification No. 6/2006-CE at Sr. No. 90 and 91 for supplies made under International Competitive Bidding. The appellant argued that benefits under both categories should apply independently. They cited various precedents supporting their view and contended that the extended period of limitation should not be invoked due to their genuine belief in entitlement to the exemption.

The appellant further argued that when goods were cleared to DMRC under a Duty Exemption Certificate, the benefit of Rule 6 of CCR, 2004 read with Notification 6/2006-CE should not be denied. They relied on court decisions and emphasized that failure in one category of exemption should not render them ineligible for another. The issue was deemed to be an interpretation of the law, warranting leniency on the extended period of limitation due to the appellant's genuine belief in their entitlement to the credit.

The adjudicating authority raised doubts regarding the nature of goods supplied by the appellant from one plant to another in connection with the DMRC contract obtained through International Competitive Bidding. While the authority accepted the principle that Cenvat Credit need not be reversed for goods supplied under such contracts, they sought clarification on whether all goods supplied were exclusively related to the DMRC contract. As the appellant did not provide sufficient evidence to establish this connection, the matter was remanded for fresh adjudication. The appellant was given the opportunity to clarify and provide evidence supporting their claim that all goods supplied were indeed for fulfilling the DMRC contract obtained through International Competitive Bidding.

In conclusion, the appeal was allowed by way of remand for further clarification and adjudication on the nature of goods supplied in connection with the DMRC contract obtained through International Competitive Bidding.

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