Strict construction of Cenvat credit conditions sustained, and an ultra vires challenge to the rule was beyond tribunal jurisdiction.

Cenvat credit on returned duty-paid goods was available only where the goods were returned to the persons to whom they had originally been cleared; because that condition was not met, the credit claim failed and the disallowance was sustained. The later amendment substituting the words "before being removed" was held to apply prospectively and did not govern the period in dispute. A challenge that Rule 16(2) was ultra vires the parent Act raised a vires question beyond the Tribunal's jurisdiction, so that challenge could not be entertained. The appeal therefore failed in full, and the order denying credit was affirmed.

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Issues: (i) Whether Cenvat credit was admissible on goods returned to the factory when the goods were not returned to the original purchasers, and (ii) whether the challenge to the validity of Rule 16(2) could be entertained by the Tribunal.

Issue (i): Whether Cenvat credit was admissible on goods returned to the factory when the goods were not returned to the original purchasers.

Analysis: Rule 16 of the Central Excise Rules, 2001 and the corresponding Cenvat credit scheme permitted credit where duty-paid goods were returned to the factory for being re-made, refined, re-conditioned or for any other reason. The expression used in sub-rule (2) was construed in its ordinary sense to mean return of the goods to the persons to whom they were originally cleared. Since the goods in question were not so returned, the condition for availing the facility was not satisfied. The later amendment substituting the expression "before being removed" operated prospectively and did not govern the period in dispute.

Conclusion: Cenvat credit was not admissible, and the disallowance was sustained.

Issue (ii): Whether the challenge to the validity of Rule 16(2) could be entertained by the Tribunal.

Analysis: A challenge that a rule is ultra vires the parent Act raises a question touching the validity of the delegated legislation. The Tribunal held that such a vires challenge was outside its jurisdiction and therefore could not be adjudicated in the appeal.

Conclusion: The Tribunal could not entertain the ultra vires challenge.

Final Conclusion: The appeal failed in full, and the order disallowing the credit was affirmed.

Ratio Decidendi: A statutory concession in the nature of Cenvat credit must be claimed strictly in accordance with the conditions attached to it, and a tribunal lacking jurisdiction to decide vires cannot entertain a constitutional or ultra vires challenge to the rule itself.

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