Cenvat credit on inputs for incidental by-products cannot be reversed merely because the output was not the intended final product.

Cenvat credit on inputs used in producing LPG as an incidental by-product could not be denied or reversed under Rule 6(3) of the Cenvat Credit Rules, 2004 where the manufacturer did not intend to manufacture the by-product. The Tribunal noted that the issue had already been settled in the assessee's own case for an identical period and that the contrary view in the impugned order was unsustainable. On that basis, reversal of credit was held unjustified and the assessee was entitled to consequential refund of the amount wrongly reversed.

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Issues: Whether Cenvat credit taken on inputs used in the manufacture of LPG, a by-product, could be denied or required to be reversed under Rule 6(3) of the Cenvat Credit Rules, 2004, and whether the refund of the amount wrongly reversed was admissible.

Analysis: The dispute was covered by an earlier final order in the assessee's own case for an identical period, where reversal of Cenvat credit under Rule 6(3) was held to be unwarranted. The Tribunal also noted that in an identical controversy the view permitting credit on inputs used for manufacture of LPG as a by-product had been accepted, since the manufacturer's intention was not to manufacture the by-product and, therefore, insistence on reversal of credit was not justified. In view of the settled position, the contrary view taken in the impugned order could not be sustained.

Conclusion: The requirement of reversal of Cenvat credit was not justified, and the assessee was entitled to the consequential refund.

Ratio Decidendi: Where inputs are used in the manufacture of a by-product, Cenvat credit cannot be denied or reversed merely because the output is an incidental by-product and not the intended final product.

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