Cenvat credit on capital goods cannot be denied where the final product was not exclusively exempt from duty.

Rule 6(4) of the Cenvat Credit Rules, 2004 permits denial of credit on capital goods only when they are exclusively used in manufacturing exempted final products. Where the final product is also capable of clearance on payment of concessional duty under a separate notification, it is not treated as wholly exempt merely because clearances during the relevant period were made only under an exemption notification. A different factual setting was held inapplicable. On that reasoning, Cenvat credit on the capital goods could not be denied.

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Issues: Whether Cenvat credit on capital goods could be denied under Rule 6(4) of the Cenvat Credit Rules, 2004 on the ground that the final product was exempt during the relevant period, despite the assessee being eligible to clear the same goods under a concessional notification at other times.

Analysis: Rule 6(4) bars credit only where capital goods are exclusively used in the manufacture of exempted final products. The assessee's final product was not wholly exempt, because it was also capable of clearance on payment of concessional duty under Notification No. 29/04-CE, while Notification No. 30/04-CE granted unconditional exemption. The mere fact that, during the relevant period, clearances were made only under the exempting notification did not convert the product into one that was exclusively exempt. The contrary view based on a different factual setting was held inapplicable.

Conclusion: Denial of credit was not justified; the assessee was entitled to Cenvat credit on the capital goods.

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