At, Customs Excise Service Tax Appellate Tribunal New Delhi
By, THE HONORABLE JUSTICE: DR. SATISH CHANDRA (PRESIDENT) & THE HONORABLE JUSTICE: V. PADMANABHAN
For Petitioner: Amit Jain, Advocate And For Respondents: M.R. Sharma, DR
1. The present set of appeals have been filed against the Order-in-Original No. 01/2017-18 dated 13/04/2017. The appellant is engaged in the manufacture of cotton as well as Polyester Viscose (PV) yarn, Cotton Yarn and Knitted Fabrics and for this purpose have seven mills in the factory. The dispute is with reference to the mill No. 1 which is used to manufacture the cotton yarn as well as knitted fabrics. The goods manufactured were mostly cleared domestically by availing full exemption under the Central Excise Notification No. 30/04-CE dated 09/07/2004. The exemption was subject to the condition that no Cenvat credit is availed on inputs as well as input services used in the manufacture. A part of the goods manufactured were also exported. The appellant claimed Cenvat credit on capital goods, and their spare parts used in this mill. By issue of the impugned order, Revenue deny such Cenvat Credit by taking the view that the goods manufactured using such capital goods enjoy exemption under the Notification No. 30/04, Since no credit a inputs/input services are being availed by the appellants. Consequently, when such goods are exported, they continue to be "exempted goods" and hence the appellant is hit by the mischief of Cenvat Credit rules 6(4) which provides that no Cenvat credit shall be allowed on capital goods which are exclusively used in the manufacture of exempted goods. Aggrieved by the impugned order the present appeals have been filed.
2. With the above background we heard Shri Amit Jain Ld. Counsel for the appellant as well as Shri M.R. Sharma, Ld. DR representing Revenue.
3. The Ld. Counsel for the appellants submitted as follows:-
(i) The benefit of Notification 30/04 has been availed by the appellants in respect of domestic clearances. Exports made up to 18/02/2014 were made by under the Letter of Undertaking, in lieu of bond. Exports made subsequent to this date were made by mentioning the Notification No. 30/04, without executing LUT. He submitted that the goods cleared for export cannot be considered as exempted goods, since in any export consignment only the goods are exported and not the taxes. The Rule 6(6)(v) of the Cenvat Credit, 2004 provides that Rule 6(4) will not be applicable in the case of export under bond. The same dispension is required to be given for the goods exported by the appellant.
(ii) To support his contention he relied on the decision of the Hon'ble Bombay High Court in the case of Repro India Ltd. v. Union of India: 2009 (235) ELT 614 (Bom.). He further submitted that above judgment was followed by the Hon'ble Himachal Pradesh High Court in the case of Drish Shoes Ltd. : 2010 (254) ELT 417 (H.P.).
(iii) He also submitted that the capital goods in question, during the period under dispute has also been used for making goods which were exported under claim of rebate.
4. Ld. DR justified the impugned order. He submitted that the goods remained fully exempted in terms of Notification No. 30/2004 and hence, the capital goods used for manufacture of such goods cannot be allowed Cenvat credit since these are being used exclusively in the manufacture of exempted goods.
5. We have heard both sides and considered the appeal record. The capital goods in question, for which cenvat credit is being denied by the revenue, has been used both for manufacture and clearance of goods domestically as well as for export. For domestic clearances, the appellant was entitled to the benefit of Notification No. 30/2004, since the appellant has not claimed Cenvat credit on inputs/input services. Using the same capital goods, goods have also been manufactured and cleared for export. The crux of the present dispute is whether the goods which are so cleared for export are to be considered as exempted goods or dutiable goods. If the goods are considered as exempted goods, then the appellant incurs the mischief of Rule 6(4) of the Cenvat Credit Rules, 2004 which mandates that no Cenvat credit can be allowed for capital goods used exclusively for manufacture of exempted goods.
6. The Cenvat Credit Rule 6(4) providing that Cenvat Credit on capital goods used exclusively in the manufacture of exempted goods shall not be allowed, has been made inapplicable in respect of circumstances outlined in Rule 6(6). One of the circumstances is given in Rule 6(6)(v) "clearance for export under bond in terms of the provision of Central Excise Rules, 2002". It is pertinent to note that Rule 6(6) has made Rule 6(4) inapplicable when "excisable goods" are removed without payment of duty for export under bond. In the facts of the present case, part of the export has taken place under bond (letter of undertaking). Certain other consignments have been exported without executing LUT claiming the goods as exempted under Notification No. 30/2004. In any case it is settled principle of law that only the goods are exported from the country and not the taxes. The Central Excise law provides for clearance of goods for export either under bond in which case the terminal excise duty is not paid at the time of clearance from the factory but in the terms of the bond the manufacturer is obligated to export the goods and get the bond closed. The other option available to manufacturer is to pay the said duty and export the goods and get the excise duty so paid rebated. In
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any case there is no doubt that the goods manufactured have been partially exported and partially cleared to the domestic tariff area. We are of the view that the benefit of Rule 6(6)(v) is required to be extended to the appellant since the goods have in fact been exported. Consequently, we are of the view that the appellant will be entitled to the Cenvat Credit on the capital goods used partially for export even though domestic clearances are exempted. 7. In the result, the impugned order is set aside and appeal is allowed. [Order Pronounced in the open court on_18/01/2018_]