MODVAT/CENVAT credit can be cross-utilised across final products; product-wise segregation of earned credit is impermissible.

MODVAT/CENVAT credit, once validly earned, may be used for payment of duty on any final product manufactured by the assessee. Rule 3(3) of the Cenvat Credit Rules, 2002 was applied on the basis that credit forms an indefeasible pool and is not required to be co-related to a particular input or product line. The Tribunal's analysis also relied on the Board's circular recognising that no product-wise restriction applies to the use of earned credit. Product-wise segregation of credit was therefore impermissible, and cross-utilisation across final products was permissible, making the demand based on such segregation unsustainable.

---

---

Issues: Whether MODVAT/CENVAT credit earned on inputs for one line of final product could be utilised for payment of duty on another final product manufactured by the assessee.

Analysis: Rule 3(3) of the Cenvat Credit Rules, 2002 permitted utilisation of credit for payment of duty on any final product. The Tribunal relied on the principle that credit, once earned, is indefeasible and there is no co-relation between a particular input and a particular final product for purposes of utilisation. The Board's circular also recognised that once credit is earned on a specified input, there is no restriction on its use for duty payment on any final product manufactured by the assessee.

Conclusion: The credit could not be fragmented or restricted product-wise, and cross-utilisation across the assessee's final products was permissible.

Final Conclusion: The impugned demand based on product-wise segregation of credit was unsustainable and the appeals succeeded.

Ratio Decidendi: MODVAT/CENVAT credit, once validly earned, forms an indefeasible pool that may be utilised for duty on any final product, subject to the governing rules.

---