Cenvat credit for a separate distillery unit needed reconsideration where duty-paid clearances contradicted the single-assessee exemption theory.

Denial of Cenvat credit on capital goods and input services used in a distillery unit was found to require fresh examination where the assessee's sugar unit enjoyed area-based exemption but the distillery was claimed to function separately. The record indicated duty payment on certain distillery clearances, which undermined the Revenue's position that the entire undertaking operated as a single excise assessee under one registration for all products. On that basis, the existing findings were held insufficient to sustain the credit denial, and the matter was remanded to the Original Authority for reconsideration of the unit-wise eligibility for credit.

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Issues: Whether denial of Cenvat credit on capital goods and input services used for the distillery unit was sustainable when the appellant's sugar unit enjoyed area based exemption and the distillery was claimed to function as a separate manufacturing unit.

Analysis: The dispute turned on whether the distillery and the sugar mill were to be treated as one excise assessee under a single registration or as separate units for Cenvat Credit purposes. The record showed that duty had been paid on certain products cleared from the distillery unit, and this created a contradiction in the Revenue's stand that the appellant was a single unit availing area based exemption for all products. The denial of credit was therefore found to require fresh examination, particularly in light of the appellant's plea that the distillery was independently functioning and that the capital goods and input services were used for dutiable clearances.

Conclusion: The denial of credit could not be sustained on the existing findings, and the matter required reconsideration by the Original Authority.

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