2025 (2) TMI 516 - AT - Central Excise

Respondents denied CENVAT credit on exported items not used in manufacturing under Rule 2(k)

CESTAT Chandigarh denied CENVAT credit to respondents on items purchased and exported without being used in manufacturing. The tribunal held that Rule ... CENVAT credit on certain items purchased by them and exported - interpretation and application of Rule 2(k) of the CENVAT Credit Rules, 2004, and Rule 16 regarding the definition of 'input' - HELD THAT:- The unmissable reading of the Rule 2(k) is that the any item to be qualified as an input for the CENVAT Credit Rules should be used in or in relation to the manufacture. It is not the case of the respondent that the items in question are used in the factory for manufacture. They are purchased by the respondents and exported. It is not the case of the respondents that the items impugned should be treated as bought-out items and the value of the same thereof has been included in the assessable value of goods either exported or cleared in the domestic market. From the facts of the case, it appears that the respondents have simply procured the goods, brought to the factory and exported these goods along with their manufactured products. For this reason, the credit is not admissible to the respondents. The respondents could have claimed rebate of excise duties paid on these items instead of availing CENVAT credit on the same, though they are not used in or in relation to the manufacture of the goods exported by them. However, the same is not the subject matter of the impugned case. Conclusion - From the facts of the case, it appears that the respondents have simply procured the goods, brought to the factory and exported these goods along with their manufactured products. For this reason, the credit is not admissible to the respondents. The impugned order is set aside - appeal allowed. 1. ISSUES PRESENTED and CONSIDERED:The core legal question considered in this case is whether the respondents are entitled to avail CENVAT credit on certain items purchased by them and exported, which the Revenue disputed. The specific issue revolves around the interpretation and application of Rule 2(k) of the CENVAT Credit Rules, 2004, and Rule 16 regarding the definition of 'input' and the eligibility for credit on goods brought to the factory for various purposes.2. ISSUE-WISE DETAILED ANALYSIS:- The relevant legal framework consists of the CENVAT Credit Rules, 2004, specifically Rule 2(k) defining 'input' and Rule 16 regarding credit on goods brought to the factory for different reasons.- The Court interpreted Rule 2(k) to require that items claimed as inputs must be used in or in relation to the manufacture of final products, which was not the case for the disputed items purchased and exported by the respondents.- Key evidence and findings include the Show Cause Notice issued by the Revenue, the Commissioner's Order dropping the proceedings, and the arguments presented by the Authorized Representative for the Department.- The Court applied the law to the facts by analyzing the nature of the items purchased, their usage, and the provisions of Rule 16 in conjunction with Rule 2(k).- Competing arguments centered around the eligibility of the respondents to claim CENVAT credit on the exported items, with the Department arguing that the items did not qualify as inputs under the Rules.- The Court concluded that the respondents were not entitled to avail CENVAT credit on the purchased items as they were not used in or in relation to the manufacture of final products, and suggested that rebate of excise duties could have been claimed instead.3. SIGNIFICANT HOLDINGS:- The Court emphasized the interpretation of Rule 2(k) and Rule 16 in determining the eligibility for CENVAT credit on goods purchased and exported by the respondents.- The core principle established is that items claimed as inputs must be used in or in relation to the manufacture of final products to qualify for CENVAT credit.- The final determination was in favor of the Revenue, allowing their appeal and holding that the respondents were not entitled to avail CENVAT credit on the disputed items.