Cenvat credit may pay duty on non-dutiable inputs, and the duty so paid can be re-credited when used in manufacture.

Cenvat credit could be used to discharge duty on inputs procured without payment of duty where the inputs were not removed as such and no specific prohibition applied under Rule 3(4)(b) of the Cenvat Credit Rules, 2004. The duty payable by the recipient on such inputs was therefore lawfully paid through available Cenvat credit. Because the inputs were ultimately used in the manufacture and clearance of dutiable final products, the duty so paid was again eligible for credit. The Tribunal relied on its earlier decision on similar facts to support this position.

---

---

Issues: Whether Cenvat credit could be used to discharge duty payable on inputs procured without payment of duty but later found not usable for the intended purpose, and whether the duty so paid could again be taken as credit.

Analysis: The inputs were not removed as such, and the situation did not fall within the bar relied upon by the Revenue under Rule 3(4)(b) of the Cenvat Credit Rules, 2004. The duty on the inputs had to be discharged by the appellant as recipient of the goods, and in the absence of any specific prohibition, utilisation of available Cenvat credit for that payment was permissible. Since the inputs were ultimately used in the manufacture and clearance of dutiable final products, the credit of such duty payment was also available. The conclusion was supported by the Tribunal's earlier decision on similar facts.

Conclusion: The use of Cenvat credit for payment of duty on the inputs was permissible, and the duty so paid was rightly available again as credit.

---