Cenvat credit under common inputs: manufacturer may choose to pay on exempted clearances instead of maintaining separate accounts.

Where common inputs are used in the manufacture of both dutiable and exempted final products, Rule 6 of the Cenvat Credit Rules, 2002 permits an alternative to maintaining separate accounts: the manufacturer may instead pay the prescribed amount on exempted clearances under Rule 6(3)(b). The Tribunal treated this as a statutory choice, not a conditional concession available only when separate accounts are impracticable. Revenue cannot compel one route merely because the assessee could maintain separate records, and absence of sale is not a basis to deny the option. The demand founded on refusal of the Rule 6(3)(b) option was therefore unsustainable.

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Issues: Whether a manufacturer clearing both dutiable and exempted goods was bound to maintain separate accounts under Rule 6(2) of the Cenvat Credit Rules, 2002, or could validly opt under Rule 6(3)(b) to pay 8% of the price of exempted final products without maintaining such accounts.

Analysis: The disputed clearances involved common inputs used in the manufacture of both dutiable and exempted pipes. The Tribunal found the facts materially similar to an earlier decision where it had been held that Rule 6 contemplated two alternative courses: maintaining separate accounts and taking credit only on inputs used for dutiable goods, or not maintaining separate accounts and paying the prescribed amount on exempted clearances. The Tribunal rejected the view that the second option was available only when separate accounts were impossible to maintain. It held that the rule gave the manufacturer a choice, and the revenue could not insist on one course merely because the manufacturer was capable of following it. The argument based on absence of sale was not accepted as a ground to deny the statutory option under Rule 6(3)(b).

Conclusion: The assessee was entitled to avail the option under Rule 6(3)(b) and the demand based on denial of that option was unsustainable.

Ratio Decidendi: Where common inputs are used for both dutiable and exempted final products, Rule 6 of the Cenvat Credit Rules, 2002 permits the manufacturer to choose between maintaining separate accounts and paying the prescribed amount on exempted clearances, and the revenue cannot compel the maintenance of separate accounts as a condition for exercising the alternative statutory option.

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