CENVAT credit on capital goods for exempted goods is tested at receipt; later exemption withdrawal does not revive entitlement.

CENVAT credit on capital goods used exclusively to manufacture exempted final products is not admissible when tested at the time of receipt under Rule 6(4) of the CENVAT Credit Rules, 2004. Later withdrawal of the exemption and the resulting dutiability of the final products does not revive a credit entitlement that was absent when the capital goods were received. A decision concerning mixed use of capital goods for exempted and dutiable products was distinguished on the facts because the goods here were used only for exempted production for more than four years, so the claim remained disallowed.

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Issues: Whether CENVAT credit on capital goods received and used exclusively in the manufacture of exempted final products could be availed after the exemption was subsequently withdrawn and the final products became dutiable.

Analysis: Rule 6(4) of the CENVAT Credit Rules, 2004 bars credit on capital goods used exclusively for exempted goods, and the admissibility of such credit has to be tested at the time of receipt of the capital goods. The later withdrawal of exemption and the consequent dutiability of the final products does not revive a credit entitlement that was not available when the capital goods were received. The cited decision distinguishing mixed use of capital goods for exempted and dutiable products did not assist the appellant because, here, the capital goods were used only for exempted products for more than four years.

Conclusion: The credit was not admissible and the rejection of the claim was upheld.

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