CENVAT credit on capital goods turns on the duty status at receipt, not later dutiable clearance in the year.

CENVAT credit on capital goods depends on the duty status of the final products on the date the goods are received. Rule 6(4) bars credit where capital goods are used exclusively for exempted goods, and later in-year emergence of dutiable clearance does not retrospectively create eligibility. Applying the Larger Bench view, the Tribunal treated the receipt date as the ative point and held that capital goods received when the final products were exempt or chargeable to nil rate duty remained ineligible for credit. The demand was therefore sustained.

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Issues: Whether CENVAT credit on capital goods received during the period when the final products were exempt or chargeable to nil rate of duty could be availed merely because the final products became dutiable later in the same financial year.

Analysis: Rule 6(4) of the CENVAT Credit Rules bars credit on capital goods used exclusively for manufacture of exempted goods. The material date for deciding eligibility is the date of receipt of the capital goods, not the later date on which the final products become dutiable. Since the appellant's final products were chargeable to nil rate of duty when the capital goods were received, the capital goods fell within the embargo under the rule. The later emergence of duty liability in the same financial year did not create entitlement to credit. The Tribunal followed the Larger Bench view that credit eligibility must be tested with reference to the duty status of the final product on the date of receipt of the capital goods.

Conclusion: The appellant was not entitled to CENVAT credit on the capital goods, and the demand was rightly confirmed.

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