Cenvat credit on capital goods survives later conditional exemption when the final product was dutiable at receipt.

Cenvat credit on capital goods was available because the final product was ordinarily dutiable when the goods were received, and a later short period of conditional exemption did not extinguish that entitlement. The credit rule was applied by reference to the dutiability of the output at the relevant time, and the fact that the credit was not taken in the same period did not by itself justify forfeiture. The respondent was therefore entitled to the credit, and the Revenue's challenge failed.

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Issues: Whether the respondent was entitled to Cenvat credit on capital goods received before the period of trial production and commercial production, despite a short subsequent period of conditional exemption for the final product.

Analysis: The final product was classifiable under Chapter Heading 68114010 of the Central Excise Tariff Act, 1985 and was ordinarily dutiable. The exemption was only conditional and was availed for a limited subsequent period. Credit eligibility for capital goods was linked to the dutiability of the final product on the date the capital goods were received. A later temporary exemption did not, by itself, extinguish the right to credit, and the rules governing credit on capital goods did not support forfeiture merely because the credit was not taken during the same period.

Conclusion: The respondent was entitled to the Cenvat credit and the Revenue's challenge failed.

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