Applicability of cenvat credit reversal on processed input goods exported

[Bhausaheb Gole]

Dear Experts,

We are manufacturing temprature measuring instruments & our unit is registered with Central Excise. our products are covered under First Schedule to the Central Excise Tariff, Act in chapter 90, we procured the excisable raw materials from our local suppliers as well as overses suppliers on fully paid excise duty, & We avail the Cenvat credit on all inputs procured in the factory, further we are doing various manufacturing process like Cutting, Super Polishing, Kordt Meter testing, Assembly, Calibration, Coating, Checking, thread measurements, job work and which will have involvement of high value machineries then goods are being Exported under BOND / REBATE with specified packing requirement & very rare & few parts which we procured from local market & doing testig,calbration, cutting, coating, measurement checking activity on that and EXPORT's these goods as a SFG.

Now, my issue is:

Excise department has raised the question on SFG, which includes only testing, caliration,cutting,coating checking activity & it does not amount to manufacture as per Section 2(f) in The Central Excises, & they called as it's a nothing but Trading Activity hence department demand us to reverse the cenvat credit on SFG & they applied Rule 6 also.

My View is:

If Goods are exported or cleared as such for exports under bond or under rebate (If our processes doen't cover under Section 2(f) in The Central Excises)

• it is relevant to examine the provisions under Cenvat Credit Rules, 2004 will be treated as deemed manufacturing. Reference to Circular No.283/117-CX.8 dated 31-12-1996.
• In the supplementary instructions of the cbec manual it is clearly written in para 3.4 of chapter 5 that inputs and capital goods can be removed for export under bond ie without payment of duty "there is no bar a manufacturer to remove the inputs or capital goods as such for export under bond".
• Provison of Rule (6) of Cenvat Credit Rule 2004.on reversal of cenvat credit @6/7% on value of goods (Difference between the value of Sales & cost of goods. "It is not applicable if goods are exported please read provision Rule 6 sub rule 6 & clause V".
• It's revenue neutral case, there is no loss of GOVT.

Please ADVICE :

On aforesaid all scenario i wanted to know relevant CASE LAWS, further Notifications & Circulars to prove that there is no need to reverse the CENVAT Credit or applicability of Rule 6, if goods are exported.

AI Summary

Cenvat credit reversal: whether exported inputs require Rule 6 reversal or refund under Rule 5 for exported goods.
The issue is whether processes performed on duty-paid inputs amount to manufacture; if not, whether clearing such goods for export under bond requires reversal of Cenvat credit under Rule 6 or whether refund/rebate under Rule 5 applies. The department treats non-manufacturing removals as trading/exempted service requiring Rule 6 reversal, while contributors cite administrative instructions and tribunal and higher court authority permitting clearance under bond without reversal and supporting refund under Rule 5, noting exceptions in Rule 6 for exported/exempted goods.