Exported nil-duty goods may qualify for CENVAT refund where duty-paid inputs are used in manufacture.

CENVAT credit relief or refund is admissible where duty-paid inputs are used to manufacture nil-duty final products that are exported. The analysis applied the export exception under Rule 6 and the refund mechanism under Rule 5 of the CENVAT Credit Rules, 2004, recognising that the scheme is intended to prevent indirect double taxation on exported goods. On that basis, rejection of the refund claim was inconsistent with the settled position and was unsustainable.

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Issues: Whether refund of reversed CENVAT credit was admissible on inputs used in the manufacture of nil-duty final products that were exported, and whether rejection of the refund claim was justified.

Analysis: The dispute turned on the scheme of the CENVAT Credit Rules, 2004 governing credit on inputs used for exported goods. The reasoning applied the principle that CENVAT credit is intended to avoid indirect double taxation on inputs, while recognising the exception contained in Rule 6 for goods cleared for export. The final products were exported and the cited precedents treated similar claims as covered by the export exception and by the refund mechanism under Rule 5. On that basis, the denial of refund was found inconsistent with the settled position.

Conclusion: The refund claim was admissible and the rejection of refund was unsustainable.

Ratio Decidendi: Where inputs duty-paid for manufacture of nil-duty goods are used in exported goods, the assessee is entitled to CENVAT credit relief or refund under the export exception to Rule 6 and the refund mechanism under Rule 5 of the CENVAT Credit Rules, 2004.

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