CENVAT credit on furnace oil used for exempted goods was disallowed after the Supreme Court settled the issue.

CENVAT credit on furnace oil used as fuel was not admissible to the extent it was consumed in manufacturing exempted goods under Rule 57AD. The Court applied the principle that credit cannot be retained for inputs used in exempt production, and the Tribunal could not continue to rely on a Larger Bench view once the Supreme Court had reversed that position. The credit claim was therefore disallowed for the exempted-goods portion, and the order in favour of the assessee was set aside.

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Issues: Whether Cenvat credit was admissible on furnace oil used as input in the manufacture of exempted goods under Rule 57AD of the Central Excise Rules, 1944, and whether the Tribunal was bound by the later reversal of the Larger Bench view on the same issue.

Analysis: The dispute concerned credit taken on furnace oil used as fuel in the manufacture of both dutiable and exempted goods. The Tribunal had followed the Larger Bench view to allow the credit, but that view had since been reversed by the Supreme Court. The governing principle applied was that CENVAT credit is not permissible on the quantity of fuel used in the manufacture of exempted goods, and the earlier Tribunal basis could not survive once the Supreme Court had finally ruled otherwise.

Conclusion: The credit was not admissible to the extent the furnace oil was used in exempted goods, and the Tribunal's order was set aside in favour of the Revenue.

Final Conclusion: The appeal succeeded because the issue stood covered against the assessee by the Supreme Court decision, and the order allowing the credit was reversed.

Ratio Decidendi: CENVAT credit on fuel input is not allowable to the extent such fuel is used in the manufacture of exempted goods, and a contrary Tribunal view cannot be sustained once the Supreme Court has authoritatively settled the legal position.

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