Cenvat credit on dutiable clearances sustained after reversal of 8% credit for exempted goods, despite no separate accounts

Where an assessee reversed 8% Cenvat credit on exempted clearances, credit taken on dutiable clearances was treated as sustainable. The Tribunal followed its earlier final order in the assessee's own case and held that non-maintenance of separate accounts for common inputs did not, by itself, justify denial of credit on dutiable goods. On that basis, the duty demand was held unsustainable and relief was granted.

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Issues: Whether the demand of duty was sustainable where the assessee had reversed 8% Cenvat credit in respect of exempted clearances, and whether non-maintenance of separate accounts for common inputs justified denial of credit on dutiable clearances.

Analysis: The issue was treated as covered by an earlier final order in the assessee's own case. The Tribunal held that once 8% Cenvat credit had been reversed in respect of exempted goods, the availment of Modvat/Cenvat credit in relation to the dutiable goods remained justified. The absence of separate accounts for inputs used in exempted and dutiable goods was held to be irrelevant in the light of the earlier binding view, and the confirmation of demand could not be sustained.

Conclusion: The demand was not sustainable and the assessee was entitled to relief; the appeal was dismissed.

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