Activity-wise Cenvat credit cannot be denied for dutiable manufacture merely because a separate service activity claimed abatement.

Cenvat credit on inputs used in the manufacture of aluminium doors and windows was admissible where the goods were cleared on payment of duty, because the assessee's manufacturing activity had to be examined separately from its construction service activity. The fact that the assessee also claimed abatement under Notification No. 1/2006-ST for construction services did not justify denial of credit attributable to manufacture. Credit law must be applied activity-wise, and admissible input credit for dutiable manufacture cannot be refused merely due to an exemption or abatement issue in a separate service segment. The denial of credit was unsustainable and the appeal succeeded.

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Issues: Whether Cenvat credit on inputs used in the manufacture of aluminium doors and windows was admissible when the assessee also provided construction services and claimed abatement under Notification No. 1/2006-ST.

Analysis: The assessee carried on two distinct activities, namely manufacture of aluminium doors and windows and provision of construction services, and each had to be examined separately. The inputs in question were received for manufacture, used in the manufacture of doors and windows, and the finished goods were cleared on payment of duty. On these facts, the credit attributable to the manufacturing activity was not affected by any alleged non-compliance in the construction service segment. Denial of credit on the basis of the service tax exemption/abatement claim was therefore without proper application of mind.

Conclusion: Cenvat credit on the inputs used for manufacture was admissible and the denial of credit was unsustainable.

Final Conclusion: The impugned order was set aside and the appeal succeeded with consequential relief in accordance with law.

Ratio Decidendi: Credit law must be applied activity-wise, and admissible input credit used for dutiable manufacture cannot be denied merely because the assessee's separate service activity involves an exemption or abatement claim.

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