Carried-forward Cenvat credit remained usable under the new regime despite mixed production of dutiable and exempt goods.

Unutilised Cenvat credit carried forward from the 2001 Rules could be treated as credit under the 2002 Rules and used for payment of duty on dutiable final products. Rule 9 preserved credit balance standing on 1-3-2002, Rule 3(3) permitted utilisation for duty payment, and Rule 6 restricted only fresh credit on inputs used in exempt goods, not pre-existing accumulated credit. Section 38A also protected accrued rights under the repealed regime. The assessee was therefore entitled to use the carried-forward credit, and the disallowance of such utilisation was unsustainable.

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Issues: Whether credit earned and remaining unutilised under the Cenvat Credit Rules, 2001 could be carried forward and utilised under the Cenvat Credit Rules, 2002 despite the assessee manufacturing both dutiable and exempt/non-dutiable goods.

Analysis: Rule 9 of the Cenvat Credit Rules, 2002 permits credit earned under the earlier rules and remaining unutilised on 1-3-2002 to be treated as Cenvat credit under the new rules and utilised in accordance with them. Rule 3(3) further allows utilisation of such credit for payment of duty on any final product, inputs, or capital goods. Rule 6 only restricts availment of credit on inputs used in exempted goods under the new regime and does not take away the right to utilise credit already accumulated under the earlier rules. The saving provision in Section 38A preserves rights and liabilities accrued under the repealed or superseded rules, so the assessee's pre-existing credit balance remained protected.

Conclusion: The assessee was entitled to utilise the accumulated credit standing in its account on 28-2-2002 for payment of duty on dutiable products, and the disallowance of such utilisation was unsustainable.

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