CENVAT credit requires input nexus and cannot be used against excise duty on unrelated final products.

CENVAT credit was treated as available only where duty-paid inputs are used in the manufacture of the relevant final product, and it could not be diverted to an unrelated excisable product. Notification No. 45/89 was read as prohibiting refund of excess credit and its adjustment or utilisation against duty on other goods. The principle of indefeasible credit was distinguished because it applies where there is a direct nexus between raw material, intermediate product and final product. On that basis, accumulated credit could not be set off against excise duty on an unconnected final product.

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Issues: Whether CENVAT credit accumulated in respect of one manufacturing activity could be utilised against excise duty on an unconnected final product manufactured later by the same assessee.

Analysis: The credit scheme was examined in the light of Notification No. 45/89 dated 11th October, 1989, which prohibited refund of excess credit and its adjustment or utilisation against excise duty on any excisable goods in other circumstances. The principle that validly taken credit is an indefeasible benefit was accepted, but only where the input is used as raw material for the final product. The reliance on the Supreme Court decision concerning indefeasible credit was found inapplicable because that case involved a direct connection between the raw material, intermediate product and final product, whereas the present claim concerned utilisation of credit for goods having no nexus with the duty-paid input.

Conclusion: The assessee was not entitled to use the accumulated credit against excise duty on a final product that was unconnected with the input on which the credit had accrued, and the claim was rejected.

Final Conclusion: CENVAT credit can be utilised only where the duty-paid input is used in the manufacture of the relevant final product, and it cannot be diverted to an unrelated excisable product.

Ratio Decidendi: Credit under the scheme remains available only for duty on a final product having the requisite input nexus, and a notification prohibiting other utilisation bars adjustment of such credit for unconnected goods.

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