CENVAT credit on capital goods used only for exempt goods is barred at receipt, despite later changes in exemption status.

Bona fide time spent before the wrong forum may be excluded for limitation purposes where revision is otherwise within condonable time. On merits, CENVAT credit on capital goods is barred when the goods are received during a period of full exemption and are used exclusively in the manufacture of exempted final products. The specific exclusion in Rule 6(4) prevails over the general timing provisions in Rule 4(2)(a) and Rule 4(2)(b), so eligibility is tested at the time of receipt rather than by a later change in the duty status of the final product. The rebate claim founded on such credit is therefore not sustainable.

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Issues: Whether the revision application was within condonable time by excluding the period spent before the wrong forum, and whether CENVAT credit on capital goods was admissible when the goods were received during a period of full exemption and were used exclusively in the manufacture of exempted goods.

Analysis: The filing delay was treated as condonable by excluding the time spent in bona fide pursuit before the wrong forum. On merits, the decisive question was whether credit on capital goods had to be tested at the time of receipt. The credit rules were read to mean that Rule 6(4) specifically bars credit on capital goods used exclusively in exempted manufacture, while the general timing provisions in Rule 4(2)(a) and Rule 4(2)(b) do not override that bar. Since the capital goods were received during the period when the final products were fully exempt and were used exclusively for exempted production, credit was held to be inadmissible and could not be taken later when the exemption structure changed.

Conclusion: CENVAT credit on the capital goods was not admissible, and the rebate claim based on such credit was not sustainable.

Final Conclusion: The revisional authority accepted the department's challenge, restored the original rejection of rebate, and the substantive relief went in favour of the Revenue.

Ratio Decidendi: Where capital goods are received and used exclusively for the manufacture of exempted goods, credit eligibility is barred by the specific exclusion in Rule 6(4) of the CENVAT Credit Rules, 2004 and must be determined at the time of receipt, not on a later change in the duty status of the final product.

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