CENVAT credit on inputs for exempt goods need not be reversed where prior binding decisions favour the assessee.

CENVAT credit on inputs used in the manufacture of goods cleared under excise exemption was not required to be reversed or repaid on the facts considered. Applying Rule 6(1) of the CENVAT Credit Rules and Explanation II to Rule 6(3), the Court treated credit as unavailable only in respect of inputs used for exempted goods, but noted that the same question had already been decided in earlier binding cases in favour of the assessee. In the absence of any distinguishing feature, the manufacturer succeeded and the appeal was dismissed.

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Issues: Whether a manufacturer is required to reverse or repay CENVAT credit taken on inputs used in the manufacture of goods cleared under exemption from excise duty.

Analysis: The question turned on the effect of Rule 6(1) of the CENVAT Credit Rules and Explanation II to Rule 6(3), under which credit is not available in respect of inputs used in exempted goods. The Court noted that the same issue had already been decided by it in earlier cases, in which the question was answered in favour of the assessee and against the Revenue, and those decisions had attained finality.

Conclusion: The manufacturer was not required to reverse or repay the credit in the facts of the case, and the issue was decided in favour of the assessee.

Final Conclusion: The appeal failed and was dismissed, with the legal position on the issue following the earlier binding decisions of the Court.

Ratio Decidendi: Where the Court has already settled that credit need not be reversed on inputs used for exempted final products, the same question must be answered in favour of the assessee absent any contrary distinguishing feature.

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