Cenvat credit on excess inputs exported after duty payment remained admissible where the goods were procured for manufacture.

Excess quantities of raw materials procured for manufacture do not lose their character as inputs merely because the entire quantity is not consumed in the final product. The test is whether the goods were obtained for use in the manufacturing process, not whether every unit was actually absorbed. Applying that principle, exported copper wire rods remained eligible inputs, and Cenvat credit with consequential rebate could not be denied on the ground of excess procurement. The same parity applied between export under bond and export on rebate claim supported this treatment. The demand and penalty were therefore unsustainable.

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Issues: Whether excess quantity of raw materials procured for use in manufacture, and exported after payment of duty, could still be treated as inputs eligible for Cenvat credit and consequential rebate.

Analysis: The goods in question were undisputedly materials used in the manufacture of the final products. Mere procurement of a quantity higher than the estimated manufacturing requirement did not alter their character as inputs, because the concept of inputs is linked to the manufacturing process and does not require that the entire quantity received must be consumed. A contrary view would make the rules dealing with clearance of inputs as such and reversal of credit redundant. The Board circular also envisaged parity between export under bond and export under claim of rebate, and the same principle was applied to hold that a manufacturer/exporter was not to be denied credit merely because the excess inputs were exported rather than consumed in the final product.

Conclusion: The excess procured copper wire rods remained eligible inputs, the credit and rebate were admissible, and the demand and penalty were unsustainable.

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