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Issues: (i) Whether credit attributable to common input services used in exempted clearances was required to be reversed without excluding cotton yarn cleared for export without payment of duty under the DEPB/export exemption regime. (ii) Whether the value of cotton yarn cleared for job work for manufacture of grey fabric or doubling of yarn was to be included while computing exempted goods for reversal of credit.
Issue (i): Whether credit attributable to common input services used in exempted clearances was required to be reversed without excluding cotton yarn cleared for export without payment of duty under the DEPB/export exemption regime.
Analysis: The dispute was held to be covered by earlier decisions of the Tribunal and the ruling of the High Court that CENVAT credit remains available where exempted goods are exported, and that export clearances are not to be brought into the reversal computation in the manner adopted in the impugned order. Judicial discipline was applied to follow the earlier binding and persuasive precedents on the same issue.
Conclusion: The issue was answered in favour of the assessee.
Issue (ii): Whether the value of cotton yarn cleared for job work for manufacture of grey fabric or doubling of yarn was to be included while computing exempted goods for reversal of credit.
Analysis: The returns and records showed that the job work turnover had already been accounted for in the exempted-goods computation, and inclusion of the same value again would amount to double counting. On that basis, the Tribunal held that the job work turnover could not be added to the value of exempted goods for reversal purposes.
Conclusion: The issue was answered in favour of the assessee.
Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential benefits, leaving no surviving demand on the disputed computation of reversal.
Ratio Decidendi: Where exported clearances are treated as exempted for CENVAT purposes, they cannot be included to enlarge the reversal base, and turnover already accounted for in the exempted-goods computation cannot be added again for reversal of common input service credit.
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