1 wp2094-10 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.2094 OF 2010 Union of India through Maritime Commissioner of Central Excise ..Petitioner. V/s. M/s. Sterlite Industries (I) Ltd. & Anr. ..Respondents. Mr. R.G. Bhatt i/b. Suresh Kumar for the petitioner. Mr. Vikram Nankani with Mr. Vipin Jain, Mr. Krishna Kumar and P.K. Shetty for the respondents. CORAM : J.P. DEVADHAR AND SMT. R.S. DALVI, JJ. DATED : 24TH MARCH, 2011 P.C. :- 1. The Commissioner of Central Excise, Raigad is aggrieved by the order passed by the Jt. Secretary to the Government of India dated 20/1/2010 whereby the Revision Application filed by the Commissioner is dismissed and the order passed by the Commissioner, Central Excise (A) is upheld. As a result whereof, the respondent No.1 ('the assessee' for short) is entitled to claim rebate of duty paid on export of capital goods by reversing the input credit availed by the petitioner. 2 wp2094-10 2. The assessee is engaged in the manufacture of copper wire rods. The assessee had imported "used aluminum casting machines" as capital goods. The credit of CVD paid on those capital goods was taken by the assessee. Those capital goods were subsequently exported in the year 2004 on payment of duty by debiting the credit of input duty. 3. Thereafter, the assessee filed rebate claim which was however, rejected by the adjudicating authority. On appeal, the Commissioner of Central Excise (A) allowed the rebate claim. Revision Application filed by the Commissioner of Central Excise was dismissed by the Jt. Secretary to Government of India and it was held that the assessee is entitled to rebate of duty paid on export of capital goods by reversing the input credit. Challenging the aforesaid order, the present petition is filed. 4. The case of the revenue in this Writ Petition is firstly, that the reversal of credit equal to the amount of duty cannot be said to be payment of duty under Rule 18 of the Central Excise Rules, 2002 and consequently the assessee is not entitled to claim rebate on such reversal of credit. Secondly, the capital goods were not exported directly from the factory of the manufacturer as contemplated under Notification No.41/94 dated 12/9/1994, Circular No.294/97 dated 30/1/1997 and Notification No.19/2004 dated 6/9/2004 and, therefore, the rebate claim 3 wp2094-10 is liable to be rejected. Thirdly, the capital goods imported by the assessee have been used by the assessee for several years and, therefore, the export of capital goods cannot be said to be "removed as such" as provided under Rule 3(5) of the CENVAT Credit Rules, 2004. 5. We see no merit in the above contention. Reversal of input credit is one of the recognized method for paying duty on the final product. In fact, the Central Government by its circular No.283 dated 31/12/1996 construing similar provisions contained in Rule 57F of the Central Excise Rules, 1944 held that where the inputs are cleared on payment of duty by debiting RG-23A Part II as provided under erstwhile Rule 57F4 of the Central Excise Rules, 1944, the manufacturer would be entitled to rebate under Rule 12 (1)(a) of the Central Excise, 1944. Rule 57F in the 1944 Rules is pari materia to Rule 3(5) of CENVAT Credit Rule, 2004. Similarly, Rule 12(1)(a) of the 1944 Rules is pari materia to Rule 18 of the Central Excise Rules, 2002. Therefore, when the Central Government has held that where the duty is paid by debiting the credit entry, rebate claim is allowable, it is not open to the departmental authorities to argue to the contrary. 6. Similarly, the argument that the capital goods have not been exported directly from the factory of the manufacturer is also without any merit because, similar contentions raised by the revenue in Writ Petition 4 wp2094-10 No.2195 of 2010 has been rejected by this Court by dismissing the petition on 23/3/2010. 7. The last contention of the revenue is that since the imported capital goods has been used by the assessee for several years, it cannot be said that the capital goods are 'removed as such' as provided under Rule 3(5) of 2004 Rules. There is some dispute as to whether the capital goods imported by the assessee were put to use before they were exported. Assuming that the said capital goods were used by the assessee before export, it would still be export of the capital goods imported by the assessee. In other words, the duty paid capital goods when exported as capital goods even after put to use for some time, Rule 3(5) of 2004 Rules would be applicable, because in such a case the capital goods even after put to use for some time continue to be capital goods. 8. The expression "removed as such" in rule 3(5) of the CENVAT Credit Rules, 2004 simply means that when inputs or capital goods are removed as inputs or capital goods as such, the assessee shall pay an amount equal to the credit availed in respect of such inputs or capital goods. In other words, inputs / capital goods on the date of removal must be in the same form as they were on the date on which they were brought into the factory. Normal wear and tear of the inputs / 5 wp2094-10 capital goods does not make them different from the original inputs / capital goods. Moreover, it is not the case of the revenue that on account of the user, the character of the capital goods has changed. Therefore, where duty paid inputs / capital goods brought into the factory are subsequently cleared for export, then Rule 3(5) of 2004 Rules would apply. Hence, the Joint Secretary to the Government of India was justified in holding that user of the capital goods before export does not in any way affect the duty liability on export of such capital goods and consequently does not affect the right of the assessee to claim rebate of duty paid on export of such capital goods. 9. For all the aforesaid reasons, we see no merit in the petition and the same is hereby dismissed with no order as to costs. (SMT. R.S. DALVI, J.) (J.P. DEVADHAR, J.)