Cenvat credit on stock inputs upheld where exemption applied and no statutory time limit existed for clearing finished goods.

Cenvat credit could not be denied merely because inputs remained unutilised, were contained in semi-finished goods, or were contained in finished goods lying in stock, where the goods became exempt and no statutory time limit was prescribed for clearance of the finished products. The court treated the exemption notification and the absence of any prescribed clearance period as decisive, and held that denial of credit was not justified on those facts. The concurrent orders in favour of the assessee were therefore left undisturbed, and the question of law was answered against the revenue.

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Issues: Whether Cenvat credit could be denied on inputs lying unutilised, inputs contained in semi-finished goods, and inputs contained in finished goods lying in stock, in view of Rule 6(1) of the Cenvat Credit Rules, 2002 and the exemption notification.

Analysis: The dispute turned on the effect of the exemption notification and the absence of any prescribed time limit for clearing the finished products. The Court noted that the assessee had availed credit and that exemption was subsequently granted to the relevant goods. It further found that no time limit had been prescribed for sale or clearance of the finished products. In these circumstances, the denial of credit was not justified and the concurrent orders in favour of the assessee did not call for interference.

Conclusion: The question of law was answered against the revenue and in favour of the assessee; the denial of Cenvat credit was not sustained.

Ratio Decidendi: Where an exemption applies and no statutory time limit is prescribed for clearing finished goods, Cenvat credit cannot be denied merely because inputs or finished goods remain unutilised or in stock.

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