CENVAT credit on fuel used for exempted goods was not required to be reversed under the applicable rules

CENVAT credit on furnace oil and oxygen used as fuel in manufacturing exempted goods was not required to be reversed under Rule 6 of the CENVAT Credit Rules, 2002 or the CENVAT Credit Rules, 2004 for the relevant period from April 2002 to March 2005. Rule 6(2) then expressly excluded inputs intended for use as fuel from the obligation to maintain separate accounts for dutiable and exempted goods, and that position continued under the 2004 Rules before amendment. The credit related only to fuel, and settled High Court and Tribunal precedent supported allowability. The lower appellate authority's order allowing credit was therefore upheld.

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Issues: Whether CENVAT credit availed on furnace oil and oxygen used as fuel in the manufacture of exempted goods was required to be reversed under Rule 6 of the CENVAT Credit Rules, 2002 and the CENVAT Credit Rules, 2004.

Analysis: The relevant period was April 2002 to March 2005, during which Rule 6(2) expressly excluded inputs intended to be used as fuel from the requirement of maintaining separate accounts for dutiable and exempted goods. The same position continued under the CENVAT Credit Rules, 2004 prior to the amendment. The credit in dispute related only to fuel used in exempted products, and the issue had already been settled by binding High Court and Tribunal decisions holding that such credit was allowable. On that basis, the order of the lower appellate authority allowing credit did not suffer from any infirmity.

Conclusion: Credit on fuel used in the manufacture of exempted goods was not required to be reversed for the relevant period, and the Revenue's appeal failed.

Ratio Decidendi: Where the applicable CENVAT Credit Rules exclude inputs intended for use as fuel from Rule 6 reversal requirements, credit taken on such fuel cannot be denied merely because the goods manufactured were partly exempted.

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