2017 (10) TMI 277 - AT - Central Excise

Refund claim - denial on the ground that the appellants have not exported the goods under bond - Rule 5 of the Cenvat Credit Rules - Held that - the goods manufactured by the appellants are totally exempted and therefore export of same under bond serves no purpose. Bond is a requirement in cases where the products are chargeable to duty and in case of failure to export, duty liability thereon can be enforced through bond against the exporter - In the instant case, it is not in dispute that the goods manufactured by the appellants were exempted and not chargeable to duty. It is also not in dispute the goods were being exported. The intention of Rule 5 of Cenvat Credit Rules is to ensure that the tax and duties are not exported. Keeping the spirit of the Rule in mind, the refund of cenvat credit should be allowed even in circumstances when exports were not made under bond, although it is a requirement of Rule 5 as well as Rule 6(6)(v) of CCR. This is more so for the reason that the goods exported by the appellants are fully exempt and export under bond would serve no purpose. Refund allowed - appeal dismissed - decided against Revenue.

Issues:
1. Refund claim under Rule 5 of the Cenvat Credit Rules.
2. Eligibility for refund of Cenvat credit.
3. Requirement of export under bond.
4. Maintenance of separate accounts for export and home consumption production.
5. Interpretation of Rule 6(6)(v) of Cenvat Credit Rules.
6. Applicability of Rule 6(1) to exempted goods exported under bond.
7. Ruling on availing Cenvat credit for goods chargeable to nil rate of duty.

Analysis:
1. The appeals revolve around a refund claim under Rule 5 of the Cenvat Credit Rules. The appellants, a declarant unit, filed a refund claim despite not being registered due to their clearances being below the threshold limit. The issue raised was the eligibility of the appellants for Cenvat credit as they had not exported goods under bond, a primary requirement under Rule 5.

2. The contention was that the appellants, by not maintaining separate accounts for export and home consumption production as required, were ineligible for the refund of Cenvat credit. The argument highlighted the importance of maintaining separate accounts for units availing exemption under specified notifications and the need for compliance with circular provisions.

3. The debate also focused on the requirement of export under bond as per Rule 5 of the Cenvat Credit Rules. The absence of export under bond was a key point of contention, with the Revenue emphasizing its significance in availing Cenvat credit. The comparison with previous cases highlighted the importance of adhering to procedural requirements.

4. The interpretation of Rule 6(6)(v) of the Cenvat Credit Rules played a crucial role in determining the eligibility for Cenvat credit. The rule's provisions regarding the export of exempted goods under bond were analyzed to understand the applicability of such rules in the present case.

5. The ruling in Repro India Ltd. case was cited to support the argument that Cenvat credit could be availed for goods used in the manufacture of final products being exported, even if the final product was exempted. The judgment emphasized the objective of mitigating double taxation and promoting international competitiveness through duty exemptions on inputs for export products.

6. The judgment also discussed the applicability of Rule 6(1) to exempted goods exported under bond, highlighting the need to interpret the rules in a manner that aligns with the government's policy objectives. The broader interpretation of "excisable goods" under Rule 6(6) was crucial in determining the scope of Cenvat credit eligibility.

7. The decision in CCE Vs. Drish Shoes Ltd. was referenced to establish that an assessee manufacturing goods chargeable to nil rate of duty could avail Cenvat credit if the goods were exported. This ruling further supported the argument that export of exempted goods under bond could still qualify for Cenvat credit benefits, even without the bond requirement being met.

In conclusion, the judgment dismissed the appeals of the revenue, emphasizing the spirit of the Cenvat Credit Rules to ensure taxes and duties are not exported. The ruling underscored the importance of aligning interpretations with policy objectives to facilitate the refund of Cenvat credit, especially for fully exempted goods being exported.

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