2001 (2) TMI 724 - AT - Central Excise

Appellate Tribunal rules Modvat credit can't be reversed for jute products exported duty-free

The Appellate Tribunal CEGAT, Kolkata held that Modvat credit cannot be reversed for inputs used in manufacturing finished jute products cleared for ... Proportionate Modvat credit reversal - eligibility of Modvat credit for inputs used in goods cleared under Chapter X procedure - in-bond clearances under Chapter X are not clearances of exempted or nil-rated goods - application of Rule 57C of the Central Excise Rules, 1944 to inputs used in goods exported under bondProportionate Modvat credit reversal - eligibility of Modvat credit for inputs used in goods cleared under Chapter X procedure - in-bond clearances under Chapter X are not clearances of exempted or nil-rated goods - Whether the proportionate Modvat credit in respect of inputs used in manufacture of finished jute product is reversible or demandable where the finished product was cleared under Chapter X procedure to an assessee who used it to manufacture goods subsequently exported under bond without payment of duty. - HELD THAT: - The Tribunal applied its earlier reasoning in Order No. A-175 to 178/Kol/2001 dated 20-2-2001 and held that clearances made in-bond under Chapter X procedure cannot be treated as clearances of exempted or nil-rated goods. Consequently, specified inputs used in manufacture of final products cleared under Chapter X are not disqualified from availing Modvat credit. The question of reversal or demand of proportionate Modvat credit therefore does not arise. The Tribunal further observed that reliance placed by the Revenue on the Larger Bench decision in Kirloskar Oil Engines Ltd. was misplaced because that decision did not deal with the specific factual matrix of a manufacturer clearing dutiable goods to another unit which exported the ultimate goods under bond without payment of duty.Proportionate Modvat credit is not reversible/demandable in the described factual matrix; the Commissioner (Appeals) orders upholding retention of the credit are affirmed.Final Conclusion: The three appeals filed by the Revenue are dismissed; the orders of the Commissioner (Appeals) upholding non-reversal of the Modvat credit are affirmed in accordance with the Tribunal's earlier decision. The judgment by the Appellate Tribunal CEGAT, Kolkata dealt with the issue of whether Modvat credit is reversible or demandable for inputs used in manufacturing finished jute products cleared for export without duty payment. The Tribunal upheld that Modvat credit cannot be reversed in such cases, rejecting the appeals filed by the Revenue.