Manufacturing capability and export rebate: documented factory evidence defeated allegations of absent production and input diversion.

Adequate manufacturing infrastructure, including machinery records, later verification, a chartered engineer's certificate, audit documents, ISO certification and filed declarations, supported the claim that the exported goods were manufactured in the appellants' factory. The Revenue's allegation that they lacked manufacturing capability was not backed by crucial evidence of procurement of finished goods from elsewhere or diversion of inputs. On that record, the benefit of doubt favoured the appellants, so denial of Cenvat credit was unsustainable and the rebate already sanctioned was not recoverable.

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Issues: Whether the appellants had manufacturing capability and had manufactured the exported goods in their factory so as to be entitled to Cenvat credit and rebate of duty paid on export.

Analysis: The evidence on record, including the list of machinery found in the factory, later verification of the same machinery, the chartered engineer's certificate, audit records, ISO certification, filed declarations, and return of merchant-exported goods under verification, supported the existence of manufacturing facility. The Revenue's case rested on the assertion that the appellants lacked manufacturing capability, but it did not produce crucial evidence showing procurement of finished goods from elsewhere or diversion of inputs. In the absence of such evidence, the benefit of doubt had to go to the appellants.

Conclusion: The appellants were held to have manufactured the goods in their factory, the denial of Cenvat credit was unsustainable, and the rebate already sanctioned was not recoverable.

Ratio Decidendi: Where the record shows adequate manufacturing infrastructure and the Revenue fails to establish diversion of inputs or procurement of finished goods, Cenvat credit and export rebate cannot be denied on a mere allegation of absence of manufacturing capability.

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