Cenvat credit on exempted goods denied where cable jointing kit packing was not manufacture and separate accounts were absent.

Packing bought-out and manufactured items into Cable Jointing Kits did not amount to manufacture, so the dispute turned on wrongful utilisation of Cenvat credit rather than excise duty liability. Under Rule 6 of the Cenvat Credit Rules, 2002, credit is unavailable for inputs used in exempted goods, and where inputs are used for both dutiable and exempted goods, separate accounts must be maintained with credit confined to inputs used for dutiable goods. Reliance on Sidhartha Tubes was misplaced because it addressed valuation, not Cenvat credit adjustment. The assessee was therefore not entitled to the claimed adjustment, and no substantial question of law arose.

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Issues: Whether the assessee was entitled to adjust Cenvat credit on bought-out items used in Cable Jointing Kits, where the final product was treated as exempted and no excise duty was payable on it.

Analysis: The process of packing bought-out and manufactured items into Cable Jointing Kits did not amount to manufacture. The Court noted that the dispute concerned recovery of wrongly utilised Cenvat credit on bought-out items and not a demand of excise duty. Under Rule 6 of the Cenvat Credit Rules, 2002, credit is not available on inputs used in exempted goods, and where inputs are used for both dutiable and exempted goods, separate accounts must be maintained and credit can be taken only on inputs used for dutiable goods. The reliance on Sidhartha Tubes was held to be misplaced because that decision dealt with valuation and not with adjustment of Cenvat credit.

Conclusion: The assessee was not entitled to the claimed adjustment of Cenvat credit, and no substantial question of law arose.

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