Cenvat credit on dies blocks allowed where tools served both exempt original equipment and duty-paid spare wheel clearances.

Cenvat credit on input dies blocks was admissible because the dies were used in manufacturing aluminium road wheels cleared both as exempt original equipment and as duty-paid spares. The record showed that the final goods were not exclusively exempt, and exemption under Notification No. 4/2006-C.E. applied only to supplies treated as original equipment. As the premise that the dies blocks were used solely in exempted production was not supported and the departmental verification report was found unreliable, denial of credit was unsustainable.

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Issues: Whether Cenvat credit was admissible on input dies blocks used to manufacture dies, where the dies were used in producing aluminium road wheels cleared to the defence establishment partly as exempted original equipment and partly as duty-paid spares.

Analysis: The clearance pattern showed that the same final goods were not invariably exempt and that duty was discharged when the wheels were supplied as spares, while exemption under Notification No. 4/2006-C.E. was availed only for supplies treated as original equipment. The departmental verification report was found to be factually unreliable, and the record indicated that the dies were used in the manufacturing process for both duty-paid and exempt clearances. On that footing, the premise that the dies blocks were used exclusively in the manufacture of exempted goods was not sustainable.

Conclusion: Cenvat credit on the dies blocks was admissible and the denial of credit was unsustainable.

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