CENVAT credit on duty-paid goods cleared as such remains admissible even without manufacturing activity under Rule 16.

Rule 16 of the CENVAT Credit Rules, 2002 was construed to allow receipt of duty-paid goods in a factory not only for re-making, refining or re-conditioning, but also for any other reason. The provision was read as covering both cases where the later process amounts to manufacture and where it does not; in the non-manufacture situation, credit may be taken on receipt and an amount equal to the credit must be paid on clearance as such. On that construction, absence of manufacturing activity did not by itself defeat CENVAT credit availment on goods received for export.

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Issues: Whether CENVAT credit was admissible on duty-paid goods received in the factory and cleared as such for export when no manufacturing activity was undertaken.

Analysis: Rule 16 of the CENVAT Credit Rules, 2002 permits receipt of duty-paid goods in the factory not only for re-making, refining or re-conditioning, but also for any other reason. The rule contemplates two situations: where the process amounts to manufacture and where it does not. In the latter situation, the assessee is entitled to take CENVAT credit on receipt of the goods and, upon clearance without manufacture, pay an amount equal to the credit taken. On this construction, the absence of manufacturing activity did not defeat the credit availment. Any allegation regarding utilisation of excess credit was not treated as a basis to deny the credit in the present proceedings.

Conclusion: CENVAT credit was held admissible and the assessee succeeded on the issue.

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