At, Customs Excise Service Tax Appellate Tribunal South Zonal Bench At Chennai
By, THE HONOURABLE MR. P.G. CHACKO
By, MEMBER (JUDICIAL) & THE HONOURABLE MR. P. KARTHIKEYAN
By, MEMBER (TECHNICAL)
Shri B.L.Meena, SDR. For the Appellants. Shri M.N.Bharathi, Advocate. For the Respondents.
P.Karthikeyan, Member (Technical)
This is an appeal filed by the Revenue against an order of the Commissioner of Central Excise (Appeals), Salem. In the impugned order, the Commissioner has vacated the order of the original authority disallowing CENVAT credit of Rs.1,90,107/- availed by the respondents and the demand of interest of Rs.318/- on the irregular CENVAT credit availed by the respondents. The facts of the case are that M/s.V Tex Garments, the respondents herein, had procured cotton yarn without payment of duty and exported fabrics during the period September'03 to December'03. The respondents had used duty-paid cotton yarn also in the export goods and had availed a credit of Rs.1,90,107/- being duty paid on such cotton yarn. As the appellants had opted to export the finished goods manufactured by using inputs procured without payment of duty in terms of Rule 19 of the Cenvat Credit Rules, 2002 read with Notification No.43/2001-CE (NT) dated 26.6.2001. The authorities felt that the respondents were not entitled to use duty-paid yarn along with non-duty paid yarn procured under Notification No.43/2001-CE for the purpose of export without payment of duty. A major ground taken by the original authority in disallowing the Modvat credit is that A.R.E.2 form contained a certification to the effect that the exporter had not availed facility of Cenvat Credit Rules, 2001. This requirement evidenced that manufacturers availing the facility of procuring excisable goods in terms of Notification No.43/01-CE were barred from availing CENVAT credit of duty paid on the inputs. In the impugned order, the Commissioner (Appeals) found that the A.R.E.2 form was common for exporters following the procedure under Notification No.41/01-CE (NT) as well as Notification No.43/01-CE (NT)both dated 26.6.2001. The form itself indicated that the same was a combined application for removal of goods for export under claim for rebate and for export under bond. The Commissioner observed that the supplementary instructions contained in Central Excise Manual issued by the Board had prescribed that benefit of input stage rebate could not be claimed in the case of export under claim for drawback or when the export was in discharge of export obligation and where facility of inputs stage credit was availed under Cenvat Credit Rules, 2001. The Commissioner found that the bar against availing Cenvat credit applied only in cases where export was under claim for rebate. There was nothing in the relevant rules or procedure which lays down that credit should not be taken of duty paid on inputs which were used in the manufacture of goods exported under Rule 19 of the Central Excise Rules read with Notification No.43/01-CE dated 26.6.2001.
2. In the appeal filed by the Revenue against the impugned order, the major ground taken is that the A.R.E-2 form required to be filled up by the exporter among others to the effect that the exporter had not availed CENVAT credit on the inputs used in the manufacture of exported goods. In the instant case, as the exporter had availed credit in respect of certain inputs they were not eligible for CENVAT credit since the finished goods had been exported without payment of duty. It is apprehended that if the reading of the lower authority is allowed to be implemented, there is a possibility that raw material procured without payment of duty would be sold and in that place duty paid raw material would be purchased and CENVAT credit availed. The credit availed would be used for clearing goods for home consumption. By taking CENVAT credit, the respondents were trying to availing the facility under both Rule 18 & 19.
3. Heard both sides. The Commissioner found that the relevant Rules/Notification governing procurement of inputs without payment of duty for export under bond did not prohibit use of duty paid goods also. The original authority had denied the CENVAT credit availed solely on the basis of the proforma of the A.R.E.2 which contained certification to the effect that exporter had not availed the CENVAT credit in respect of the finished goods covered by A.R.E.2. The Commissioner has found that the application itself says that it is a common application for removal goods for export both under claim for rebate and under bond. I also find that the rules and procedures prohibit availment of CENVAT credit of duty paid on inputs only if the input stage duty is claimed back by the exporter as drawback or rebate. Another situation in which availment of credit is prohibited is when goods are exported in discharge of export obligation under DEEC scheme. As long as the respondent did not c
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laim the input stage credit and had exported the finished goods under bond. There is no requirement that the credit availed by the exporter should be reversed. The lower authority had proceeded on a wrong reading of the proforma of the application for removal of goods for export and the impugned order has rectified the error committed by the original authority. In the circumstances, I find that the impugned order does not call for any interference. In the result, the appeal filed by the Revenue fails and is dismissed.