CENVAT credit under compounded levy scheme fails without clear segregation of input credit for non-notified goods.

Unutilized CENVAT credit on the date of opting for the compounded levy scheme generally lapses, but credit attributable to inputs used for non-notified goods may be retained only if the assessee can establish the exact quantum with certainty. Where common records were maintained for notified and non-notified goods and no separate accounts or reliable segregation of credit were produced, the assessee failed to show how much of the disputed credit related to non-notified goods. In the absence of such segregation, the claim for retention and utilisation of the credit could not be accepted, and the disallowance was upheld.

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Issues: Whether the assessee was entitled to retain and utilize unutilized CENVAT credit lying on the date of opting for the compounded levy scheme for payment of duty on non-notified goods, despite maintaining common records for notified and non-notified goods and not being able to segregate the credit attributable to the latter.

Analysis: The assessee had opted for the compounded levy scheme for notified goods, under which unutilized credit would ordinarily lapse. However, since the assessee was also manufacturing non-notified goods, credit relatable to inputs used for such goods could be allowed only if the assessee established the quantum with certainty. The records showed that no separate accounts were maintained for the two categories of goods, and the assessee could not show how much of the disputed credit pertained to inputs used in or in relation to the manufacture of non-notified goods. In the absence of such segregation, the claim could not be accepted.

Conclusion: The disallowance of the disputed CENVAT credit was upheld and the assessee's claim failed.

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