CENVAT credit on plates used for capital goods was denied where the goods were cleared without being used in manufacture.

CENVAT credit was held inadmissible on stainless steel plates procured for manufacture of capital goods and later cleared as such without being used in manufacture. The CENVAT Credit Rules, 2004 are confined to goods used in relation to manufacture, and the special treatment for inputs and capital goods under Rule 2(k) cannot be extended to items acquired for making capital goods and then removed unchanged. Earlier decisions and administrative clarification did not address this precise question, and the statutory scheme could not be expanded to bypass the limits attached to inputs and capital goods. The Revenue's appeal succeeded.

---

---

Issues: Whether CENVAT credit was admissible on stainless steel plates procured for manufacture of capital goods and exported as such, and whether such goods could be treated as inputs eligible for removal as such under the CENVAT Credit Rules, 2004.

Analysis: The scheme of CENVAT credit under the Central Excise Act, 1944 is confined to goods used in relation to manufacture, and the special treatment accorded to inputs and capital goods under Rule 2(k) of the CENVAT Credit Rules, 2004 cannot be extended to goods procured for making capital goods and then cleared without being used in manufacture. The earlier decisions and administrative clarification relied upon by the first appellate authority did not decide this precise question. The statutory framework does not permit the credit mechanism to be used in a manner that would bypass the limitations attached to inputs and capital goods, or to enlarge the delegated rule-making power by interpretation. Allowing such removals would be inconsistent with the legislative scheme intended to prevent cascading of tax only in relation to manufacture.

Conclusion: CENVAT credit was not admissible on the goods in question, and the Revenue's appeal succeeded.

---