Cenvat credit unavailable on inputs used for exempt captively consumed capital goods, with denial of credit upheld.

Cenvat credit was not available on inputs used to manufacture exempt capital goods that were captively consumed. The Tribunal held that the exemption notification governing inputs for exempt final products did not confer entitlement to credit, and under the applicable credit rule no credit arose where the inputs were used in exempt final products. The assessee also failed to show that the capital goods were used in the manufacture of dutiable finished products, so denial of credit was upheld.

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Issues: Whether Cenvat credit on inputs was admissible when the inputs were used in the manufacture of capital goods that were exempted and captively consumed.

Analysis: The Tribunal held that the exemption notification relied upon dealt with the availability of exemption for inputs used in exempt final products and did not govern the entitlement to credit on inputs. Under the applicable credit rule, credit could not be taken on inputs used in the manufacture of exempt final products. Since the capital goods manufactured were admittedly exempt and were captively used, credit on the inputs did not arise. The Tribunal also noted that the capital goods were meant for the workshop for repairs and were not shown to be used for manufacture of dutiable finished products.

Conclusion: The credit was not admissible and the appeal failed.

Final Conclusion: The denial of credit was upheld and the assessee received no relief.

Ratio Decidendi: Cenvat credit is not available on inputs used in the manufacture of exempt final products, including captively consumed exempt goods.

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