Export of exempted goods - Cenvat Credit or refund of credit - CBEC strikes exporters through a long winded amendment
WHEN dutiable goods are exported, the exporter (manufacturer) can export the goods without payment of excise duty under a bond/ LUT. There is no bar on taking Cenvat Credit on the inputs used in the manufacture of these goods and if the credit cannot be used for payment of duty on other goods, there is also a provision for getting refund of the unused credit.
Now what happens if the exported goods are exempted from excise duty? There is no need for any bond or LUT for exporting these goods as there is no duty any way. But what about Cenvat Credit? Can Credit be taken and will refund be allowed?
Department was of the view that no credit or refund can be allowed. We had covered this issue in 21.07.2009 and DDT 1164 - 29.07.2009 wherein it was observed,
It is another matter that the High Court or the CESTAT was also not impressed with this idea of the department subjecting export of exempted goods to Rule 6(1) read with Rule 6(3) of CCR [See Repro India Ltd vs. Union of India & Anr and Neo Foods Pvt Ltd vs. CC (Appeals) 2009-TIOL-976- CESTAT -BANG].
In spite of such clear mandate from the High Court / CESTAT, it appears that these officers while issuing show cause notices to deny refunds claimed under Rule 5 of CCR , are also resorting to issue of show cause notices for recovering the amount payable in terms of Rule 6(3)(ii) of CCR for having availed CENVAT credit on such inputs/input services used in the manufacture of exempted goods cleared for export. This approach goes against the grain of the CENVAT scheme and the judicial pronouncements on the subject.
Just last week, we reported a case of the HP High Court, Exempted goods exported – CENVAT Credit entitled on inputs: -
While we were eagerly waiting for a favourable clarification from the Board, what we actually got was a draconian amendment to Notification No. , dated the 26th June 2001.
Export without payment of duty is allowed under Rule 19 of the Central Excise Rules, subject to the conditions, safeguards and procedure set out in Notification No. , The first condition is that the exporter shall execute a bond and the manufacturer-exporter may furnish a letter of undertaking.
Now this notification is amended to include a condition that “export of excisable goods which are chargeable to nil rate of duty or are wholly exempted from payment of duty, other than goods cleared by a hundred per cent export-oriented undertaking, shall not be allowed under this notification;”.
What the Board probably wants to achieve by this amendment is to deny Credit and/or refund under the CENVAT Credit Rules and undo judgements of High Courts.
Board seems to have forgotten the fact that the policy of the government is to export goods and not taxes.
Notification No. , Dated: May 26, 2010