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of <h1>Supreme Court: Cenvat credit not allowed on inputs for exempted products</h1> <h3>Commissioner of Central Excise, Vadodara Versus Gujarat Narmada Valley Fertilizers Company Ltd.</h3> Commissioner of Central Excise, Vadodara Versus Gujarat Narmada Valley Fertilizers Company Ltd. - 2012 (286) E.L.T. 481 (S.C.) Issues:1. Entitlement to claim cenvat credit on Low Sulphur Heavy Stock (LSHS) used as fuel input for generating steam.2. Interpretation of Rule 6 of the Cenvat Credit Rules, 2002 regarding cenvat credit on inputs used in the manufacture of exempted goods.3. Conflict between the decisions in Gujarat Narmada Fertilizers Co. Ltd. v. Commissioner of Central Excise and Gujarat State Fertilizers & Chemicals Ltd. cases.Analysis:1. The assessee claimed cenvat credit on LSHS used as fuel input for generating steam, which was then utilized to produce electricity for manufacturing fertilizer exempt from excise duty. The Revenue disputed this claim, leading to show cause notices issued by the Commissioner for recovery of wrongly availed cenvat credit, interest, and penalties.2. The Tribunal, after a larger Bench decision, held in favor of the assessee, allowing the cenvat credit based on a previous Tribunal decision. However, the Supreme Court, in Commissioner of Central Excise v. Gujarat Narmada Fertilizers Company Limited, set aside the larger Bench decision, emphasizing Rule 6(1) and 6(2) of the Cenvat Credit Rules, 2002. The Court clarified that cenvat credit is not allowable on inputs used in the manufacture of exempted final products, including fuel.3. The conflicting decisions in Gujarat Narmada and Gujarat State Fertilizers & Chemicals Ltd. cases regarding the entitlement to claim cenvat credit on LSHS used as an input for manufacturing exempted goods led to the Supreme Court referring the issue to a larger Bench for resolution. The conflict arose due to differing interpretations of the Cenvat Credit Rules, 2002, specifically on whether cenvat credit is permissible on duty paid LSHS used in manufacturing exempted goods.This detailed analysis outlines the legal dispute surrounding the entitlement to cenvat credit on LSHS, the interpretation of relevant rules, and the need for resolving conflicting decisions through a larger Bench to provide clarity on the issue.
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