The Chandigarh bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the CENVAT Credit of Excise Duty is allowable even if the final products are destroyed during testing.
Maruti Suzuki India Ltd, the appellant assessee is engaged in the manufacture of motor vehicles, spares, components, etc., and is availing CENVAT credit on inputs, capital goods, and services, the assessee sends some of the vehicles to their associated companies situated outside India for testing, research and development purposes; such vehicles exported did not materialize in any export realization.
The assessee appealed against the order passed by the adjudicating authority for confirming the demand of CENVAT credit of Rs.1,90,20,198/- along with interest and for the imposition of penalty against the assessee.
Krati Singh, the counsel for the assessee contended that the CENVAT credit cannot be denied just because some motor vehicles, conveniently called prototypes by the Department, are exported without payment of duty under bond and are further destroyed in the process, and sale proceeds also are not realized.
Narinder Singh, the counsel for the department relied on the decisions made by the lower authorities and contended that there was no realization of foreign remittance and since the goods are destroyed, the same cannot be treated as clearance of goods for export and re-import thereafter and the CENVAT Credit was not entitled to the assessee.
The Bench observed that in the case of Flex Engineering Ltd, the court held that there was no provision under the CENVAT Credit Rules,2002 to deny CENVAT credit just because the final products were destroyed during testing and for the reason that no export proceeds had been realized for such exports of prototypes.
The two-member bench comprising S.S Garg (Judicial) and Anjani Kumar(Technical) held that the assessee was eligible for the availment of CENVAT Credit even if the final products were destroyed during testing.
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