NCCD credit on captive inputs cannot be recycled when final product enjoys exemption, as double benefit defeats the levy.

Where NCCD exemption applied to DTY manufactured from captively consumed POY, the Tribunal held that the assessee could not simultaneously take Cenvat credit of NCCD paid on the captive input and reuse that credit to discharge NCCD on other clearances. The exemption was treated as intended to prevent double levy within the same manufacturing chain; allowing both the exemption on the finished product and credit on the input would create a double benefit and defeat the levy. The Tribunal also held that prior decisions cited by the assessee were distinguishable. Penalty was not sustained because the dispute involved interpretation of law, while the demand and interest were upheld.

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Issues: Whether the assessee could avail Cenvat credit of NCCD paid on POY captively consumed for manufacture of DTY when DTY was exempt from NCCD, and whether such credit could be utilised to pay NCCD on other clearances.

Analysis: The Tribunal held that the exemption from NCCD on DTY was intended to avoid double levy on goods in the same chain of manufacture. Once the exemption was availed, credit of NCCD paid on the captive input could not again be taken and recycled for payment of NCCD on other goods. The decisions relied upon by the assessee were held to be inapplicable on facts or under different statutory regimes. Allowing both exemption on the finished product and credit on the input would defeat the object of the levy and create revenue leakage. The Tribunal also observed that penalty was not warranted because the dispute turned on interpretation of law.

Conclusion: The Revenue's appeal succeeded and the order of the Commissioner (Appeals) was set aside. The credit was held inadmissible and the demand with interest was upheld.

Ratio Decidendi: Where a statutory exemption from NCCD operates on the final product, the assessee cannot simultaneously retain and utilise credit of the same duty paid on captive inputs in a manner that results in double benefit and defeats the levy.

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