CENVAT credit on fuel for steam generation upheld where manufactured goods were non-excisable, not merely exempted.

CENVAT credit on fuel used to generate steam could not be denied merely because the final products were treated as exempt, where the manufactured goods were covered by the Medicinal and Toilet Preparations Act, 1955 and were outside the Central Excise levy altogether. The Tribunal held that non-excisable goods cannot be equated with exempted goods for CENVAT purposes, and distinguished precedent dealing with dutiable goods that were only exempted. The Revenue's demand-based challenge therefore failed, and the assessee's entitlement to credit was sustained.

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Issues: Whether CENVAT credit on fuel used for generating steam could be denied on the footing that the final product was exempted, when the goods manufactured were not excisable goods and were outside the purview of the Central Excise Act, 1944.

Analysis: The Tribunal noted that both sides accepted that the goods in question were covered by the Medicinal and Toilet Preparations Act, 1955 and not chargeable to duty under the Central Excise Act, 1944. On that basis, the goods were treated as non-excisable and therefore not as exempted goods for the purpose of the CENVAT scheme. The precedent relied on by Revenue was distinguished because it concerned a situation where the final product was dutiable but exempt, whereas the present matter involved goods outside excise levy altogether.

Conclusion: CENVAT credit could not be denied on the Revenue's theory, and the appeals failed.

Final Conclusion: The impugned demand-based challenge was rejected and the assessee's entitlement to credit was sustained.

Ratio Decidendi: Goods that are not excisable and are outside the Central Excise levy cannot be equated with exempted final products for denying CENVAT credit on fuel used in their manufacture.

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