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2023 (10) TMI 803 - AT - Central ExciseCENVAT Credit - inputs and input services that have gone into the manufacture of prototype cars, manufactured and exported by the appellants for testing - duty not paid on the final goods exported - prototype motor vehicles manufactured and exported by the appellants are excisable goods or not - extended period of limitation. Whether credit availed on inputs and input services that have gone into the manufacture of prototype cars, manufactured and exported by the appellants for testing, for the reason that duty has not been paid on the final goods exported? - HELD THAT:- The CENVAT credit is admissible to a manufacturer or producer of final products and the provider of taxable service when such inputs are received in the factory; CENVAT credit is not admissible on such quantity of inputs used in or in relation to the manufacture of exempted goods subject to some exceptions. One such exception is that there is no bar on availment of CENVAT credit when the goods are exported under bond.In the instant case, the Department attempts to argue that the motor vehicles sent abroad by the appellants for testing are not suffering any duty; no export proceeds are realized and hence, CENVAT credit is not applicable - the contention of the Department has no legal basis. As per the provisions of CENVAT credit under CCR, 2004, there is no such bar on availment of CENVAT credit when the goods are exported. A conjoint reading of Rule 19 of CER and definition of ‘final products’ would make it clear that the argument that the export goods are not final products is not acceptable. Further, there is nothing in Rule 19 to say that in case of breach of conditions of the bond, CENVAT credit attributable to the export goods shall be disallowed. The Department was within its right to take whatever action on the appellants for not adhering to the conditions of the bond. It is not on record whether any such action has been initiated by the Department - for the reason that export proceeds are not realized, CENVAT credit,which is otherwise admissible, cannot be denied. There is no provision under the Central Excise Rules or CENVAT Credit Rules to deny CENVAT credit just because the final products are destroyed during testing and for the reason that no export proceeds have been realized for such exports of prototypes - Hon’ble Supreme Court and the Tribunal has been consistent in holding that testing is integral to the activity of manufacture and CENVAT credit attributable to the inputs that have gone into the manufacture of said final products cannot be denied to the appellants. Whether in the facts and circumstances of the case, extended period is invocable? - HELD THAT:- There is considerable force in the arguments of the appellants. Moreover, the Department themselves have decided the issue in favour of the appellants for the year 2014-15. Notwithstanding the fact that the said order has been appealed against, it goes to prove that the issue was not free of doubt and the appellants had reasons to entertain the view they had on the issue. As the issue involves interpretation of legal provisions, suppression etc. cannot be alleged and extended period cannot be invoked. Both the appeals are allowed.
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