Cenvat credit on packing material and design booklets upheld; rebate could not be denied because duty was paid by credit reversal.

Cenvat credit was admissible on hangers used as packing material for exported fabrics and on sample booklets containing designs and drawings, as both qualified as inputs used in or in relation to manufacture under Rule 2(k) of the Cenvat Credit Rules, 2004. Rebate could not be denied merely because the duty had been paid by reversal of credit, since the duty retained its character as duty and the goods were exported along with the disputed articles. The credit claim and rebate claim were therefore allowed.

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Issues: Whether Cenvat credit was admissible on hangers and sample booklets used in relation to manufacture of exported fabrics, and whether rebate could be denied on the ground that duty was paid by reversal of credit.

Analysis: The hangers were treated as packing material used for the fabrics and therefore qualified as inputs under Rule 2(k) of the Cenvat Credit Rules, 2004. The booklets containing designs and drawings were held to be essential for manufacture of the fabrics and thus used in or in relation to manufacture. It was further held that, even if these articles were treated as cleared as such, they were exported along with the goods and rebate could not be denied merely because duty stood paid by reversing credit, as the duty retained its character of duty.

Conclusion: Cenvat credit on the hangers and booklets was admissible and the rebate claim could not be rejected on the stated ground.

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