CENVAT Reversal for merchant export

[CA Hemanth Kumar]

Dear Experts,

Does reversal of CENVAT under rule 6(3) of CCR, 2004 will apply for merchant exports, treating as a trading activity or can we take shelter under Rule 6(6) (v) , i.e. export under bond in terms of the provisions of the Central Excise Rules, 2002.

Please provide your views and suportings.

Thanks in advance.

[KASTURI SETHI]

We are talking of Pre-GST era.It is relevant to know the definition of merchant exporter.

“Merchant Exporter means a person engaged in trading activity of exporting of goods.Merchant Exporter procures goods from the manufacturer and exports the same on his account respectively. Merchant exporter use to procure goods without payment of duty from the manufacturer and export the same without payment of duty by executing a Bond/LUT.

Merchant exporter deals in trading activity of exporting goods. Exported goods cleared without payment of duty under bond are not to be treated as exempted goods. Such goods are to be treated as duty paid goods for the purpose of so many export benefits not only of Cenvat Credit.

Thus in my view reversal of credit is not required. Shelter of Rule 6(6)(v) can be taken.

AI Summary

Cenvat credit reversal for merchant exports: exports under bond treated as duty-paid goods, reversal not required. Merchant exporters who procure goods and export them without payment of duty under bond/LUT should not have Cenvat credit reversed under Rule 6(3), because such exports are not treated as exempted goods but as duty-paid goods for export benefits, permitting reliance on Rule 6(6)(v) for export under bond without reversal.