Cenvat credit on Special Boiling Point Spirit upheld where it was used as raw material, not petrol, and penalty fell away.

Special Boiling Point Spirit and Solvent 1425 used as raw materials in rubber-solution manufacture were not excluded from the Cenvat definition of "input" as motor spirit commonly known as petrol, because the goods were identified as SBPS, used as inputs rather than fuel, and the tariff and exemption framework distinguished them from petrol. The Tribunal also held that its earlier ruling on SBPS remained binding in the absence of any stay or reversal, so the adjudicating authority was bound to follow it. Cenvat credit was therefore admissible, and the demand and penalty could not survive.

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Issues: Whether Special Boiling Point Spirit and Solvent 1425 used as raw materials in the manufacture of rubber solution were excluded from the definition of "input" as motor spirit commonly known as petrol, and whether denial of Cenvat credit and the consequential penalty were sustainable.

Analysis: The inputs were used as raw materials and not as fuel. The invoices described the goods as SBPS and not petrol. The relevant exemption notification and the additional excise provisions drew a distinction between "motor spirit commonly known as petrol" and other motor spirits. The tariff structure also showed that SBPS and petrol fall under different sub-headings. The Tribunal's earlier decision holding SBPS to be outside the exclusion for petrol was binding, and, in the absence of any stay or reversal, the adjudicating authority was bound to follow it.

Conclusion: SBPS and Solvent 1425 were not covered by the exclusion for "motor spirit commonly known as petrol", Cenvat credit was admissible, and the demand with penalty could not survive.

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