2025-VIL-1694-CESTAT-CHE-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise – Section 11AC of Central Excise Act, 1944 – Export of cotton yarn – Availment of exemption – Appellant is engaged in manufacture of cotton yarn – Appellant cleared cotton yarn for export by availing exemption under Notification No.30/2004-CE – Appellant took CENVAT credit of service tax paid on input services and utilized it towards payment of duty on clearance of final products – Department issued show cause notice alleging that there was short payment (reversal) of CENVAT credit attributable to common input services used in manufacture of exempted goods and proposed to recover said amount with interest – Joint Commissioner confirmed demand as proposed in show cause notice – Commissioner (Appeals) upheld order passed by Joint Commissioner – Whether value of clearances for export made by Appellant under Duty drawback scheme for which exemption under Notification No.30/2004 has been availed has to be included for reversal of credit – HELD – It is not the case of department that goods have not been exported or Appellant did not have relevant documents for availing credit or inputs have not been used for manufacture of exported goods. Credit is eligible on duty paid on inputs and input services used in manufacture of exempted goods which are exported. Demand alleging that Appellant has to reverse credit after including value of export clearances was not proper – Appeal allowed - Value of waste yarn – Admissibility of credit – Whether value of yarn waste without payment of duty can be included for reversal of credit – HELD – Department is of view that credit on inputs contained in waste is not eligible and has to be reversed by Appellant. CENVAT credit is admissible so long as inputs are used in or in relation to manufacture of final products. CENVAT credit is admissible in respect of amount of inputs contained in any of waste, reuse or bye product. Value of waste yarn cannot be included in value of exempted turnover - Clearance of yarn for job work – Whether value of cotton yarn cleared for job work for manufacture of grey fabric has to be considered for reversal of credit – HELD – Appellant had sent cotton yarn to job worker's premises for conversion into either grey fabric or doubled yarn and received back the job worked goods. After carrying out necessary processes, grey fabric/doubled yarn was cleared for domestic consumption without payment of duty by availing exemption under Notification No.30/2004-CE. Appellant had already included value of goods so cleared under category of "exempted goods" for working out quantum of credit to be reversed. Therefore, to include the value of goods cleared for job work would tantamount to double jeopardy and is not sustainable in law. Impugned order passed by Commissioner (Appeals) is set aside
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