2010 (1) TMI 1025 - AT - Central Excise

Summary

Issues:
- Recovery of differential Cenvat credit and penalty imposed for under-valuation of exported goods.

Analysis:
1. The appellants were involved in the manufacture of goods falling under specific Chapter Headings. They exported a portion of returned goods under bond without paying Central Excise duty. The department demanded the reversal of differential Cenvat credit amounting to Rs. 55,895, along with an equal penalty for alleged under-valuation of the exported goods.

2. The advocate for the appellant argued that there is no provision under Central Credit Rules for the recovery demanded by the department. He highlighted Rule 16 of Central Excise Rules and Rule 3(4)(b) of Cenvat Credit Rules, which the lower authority relied on, stating that these rules are not relevant or applicable in this scenario.

3. On the other hand, the JDR representing the department supported the department's stance on the matter.

4. The judge examined the provisions of Rule 3(4)(b) of Cenvat Credit Rules and Rule 16 of Central Excise Rules. It was concluded that these rules were not applicable as the goods were exported under bond, exempting them from duty payment. The department's reliance on these rules was deemed unfounded. Additionally, it was noted that the department failed to recognize that the returned goods were actually exported, not sold domestically, which would have triggered Rule 16 if they were sold domestically.

5. Consequently, the judge found the department's order unsustainable in light of the law and ruled in favor of the appellant, allowing the appeal and providing consequential relief.

This judgment clarifies the application of specific rules in cases of exported goods under bond, highlighting the importance of accurate assessment and interpretation of relevant provisions to avoid unjust penalties and recoveries.