Rebate on deemed duty payment under Cenvat Credit Rules upheld where inputs or capital goods were cleared as such for export.

An amount paid when inputs or capital goods are cleared as such under the Cenvat Credit Rules, 2004 is treated as duty, not merely as reversal of credit, because Rule 3(5) and Rule 3(6) deem the amount equal to credit availed to have the character of duty for credit purposes. On that construction, where export of the goods is undisputed, the payment made at export falls within Rule 18 of the Central Excise Rules, 2004 and qualifies for rebate. The rejection of the rebate claims was therefore unsustainable, and the rebate was admissible.

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Issues: Whether the amount debited or reversed when inputs or capital goods are cleared as such can be treated as duty so as to qualify for rebate under Rule 18 of the Central Excise Rules, 2004.

Analysis: A conjoint reading of Rule 3(5) and Rule 3(6) of the Cenvat Credit Rules, 2004 shows that when inputs or capital goods on which credit has been taken are removed as such, the manufacturer must pay an amount equal to the credit availed, and that amount is eligible as Cenvat credit as if it were duty paid. Applying harmonious construction, the amount paid on such removal cannot be treated as a mere reversal of credit; it acquires the character of duty. The actual export of the goods was not disputed, and the payment made at the time of export was therefore covered by Rule 18.

Conclusion: The rebate was admissible and the rejection of the rebate claims was unsustainable.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: An amount paid on removal of inputs or capital goods as such under the Cenvat Credit Rules, 2004 is to be treated as duty for the purpose of rebate under Rule 18 of the Central Excise Rules, 2004.

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