Cenvat credit on repair inputs for re-exported transformers was upheld as export-linked processing, not mere manufacture.

Cenvat credit on inputs used to repair transformers later re-exported was held not liable to reversal where the export notification and relevant rule extended to inputs used in manufacture or processing of export goods. The expression was treated broadly enough to cover processing even if it did not amount to manufacture, and the credit could not be denied merely because the activity was repair. As the inputs were contained in the goods ultimately exported, the assessee was entitled to the export benefit and the demand for reversal was unsustainable.

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Issues: Whether Cenvat credit taken on inputs used in repairing exported transformers was required to be reversed, and whether such repair activity was eligible for the export benefit under the governing notification and rule.

Analysis: The inputs on which credit was availed were used in repairing transformers that were subsequently re-exported. The benefit under the notification and the relevant export rule extends to inputs used in the manufacture or processing of export goods, and the expression is broad enough to cover processing even where it does not amount to manufacture. Since the inputs were contained in the goods ultimately exported, the credit could not be denied merely because the activity was repair.

Conclusion: The demand for reversal of Cenvat credit was unsustainable and the assessee was entitled to the export benefit.

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