Rule 16 Cenvat credit allowed for returned rental machinery dismantled and used as components in manufacture.

Credit under Rule 16 of the Cenvat Credit Rules, 2002 was held admissible where machinery cleared on rental basis was returned to the factory, dismantled, and its components were used to manufacture other goods. The lower authority had denied credit because the goods were not brought back for remaking, refining, or reconditioning, but the Tribunal applied the earlier precedent cited by the Commissioner (Appeals) and treated the returned goods as covered on the same facts. On that basis, denial of credit was not sustainable and the appeal failed.

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Issues: Whether credit under Rule 16 of the Cenvat Credit Rules, 2002 was admissible where machines received back after rental use were dismantled and their components were used in the manufacture of other goods.

Analysis: The goods had been cleared on rental basis and later returned to the factory. After return, they were dismantled and the components were used for manufacturing other machines. The lower authority had denied credit on the view that the goods were not brought back for being remade, refined or reconditioned. The Tribunal found the facts to be squarely covered by the earlier precedent relied upon by the Commissioner (Appeals), since in that case also the returned goods were not remade or refined but were used as components in the manufacture of other goods.

Conclusion: Credit under Rule 16 could not be denied on the facts of the case; the appeal failed.

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