Cenvat credit on exported exempted goods remains refundable under the export exception, preserving relief from domestic duty burden.

Cenvat credit on inputs and packing materials used in exempted goods exported without payment of duty was held to remain admissible under the export exception in the Cenvat Credit Rules, 2002. Rule 6(1) generally bars credit for inputs used in exempted goods, but Rule 6(5) recognises that export clearances should not be burdened with domestic duties. On that basis, denial of refund of the credit would defeat the export relief intended by the scheme, so refund was allowed and the lower authority's denial was not justified.

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Issues: Whether Cenvat credit on inputs and packing materials used in the manufacture of exempted goods exported without payment of duty could be denied, and whether refund of the credit was admissible under the exception for exports.

Analysis: Rule 6(1) of the Cenvat Credit Rules, 2002 bars credit on inputs used in the manufacture of exempted goods. Rule 6(5) carves out an exception where exempted goods are cleared for export without payment of duty, reflecting the policy that domestic duties should not burden export prices. Where the finished goods are exported without payment of duty, denial of input credit refund would defeat that purpose.

Conclusion: The refund of Cenvat credit was admissible and the denial by the lower authority was not justified.

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