Cenvat credit on capital goods stays valid despite later exemption for finished goods, as earlier eligibility remains unchanged.

Cenvat credit on capital goods, validly taken when the final products were dutiable, could not be denied or reversed merely because the assessee later availed an area-based exemption for the finished goods. The credit remained legally admissible because the goods were received on duty payment and were eligible on the date of availment, and a subsequent exemption did not make the earlier credit irregular. The Revenue's challenge therefore failed, and the order allowing the assessee's credit was left undisturbed.

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Issues: Whether Cenvat credit on capital goods, validly availed when the final products were dutiable, could be denied or reversed merely because area based exemption was availed later.

Analysis: The capital goods were received on payment of duty and the credit was otherwise admissible on the date of availment. The final products were not enjoying full exemption at that time. The subsequent claim of exemption did not render the earlier credit irregular. Motive or alleged postponement of exemption could not override the legal position governing credit eligibility. The settled view, as relied upon, is that credit lawfully taken on capital goods need not be reversed merely because the goods manufactured later become exempt.

Conclusion: The denial of credit was unjustified and the Revenue's challenge failed.

Final Conclusion: The appeal was rejected and the order allowing the assessee's credit was left undisturbed.

Ratio Decidendi: Credit on capital goods, once validly earned during a period when the final products are dutiable, is not lost merely because the assessee later avails an exemption for the finished goods.

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