Conditional exemption does not trigger Cenvat credit lapse; balance credit remains usable under Rule 11(3)(i).

Unutilized Cenvat credit did not lapse on opting for a conditional exemption, because Rule 11(3) of the Cenvat Credit Rules, 2004 distinguishes between absolute and conditional exemptions. A conditional exemption notification under Notification No. 30/2004-CE falls within Rule 11(3)(i), while lapse of the balance credit under Rule 11(3)(ii) applies only to an absolutely exempt final product. The earlier interpretation treating the two sub-rules as distinct alternatives was followed, so denial of credit utilisation was unsustainable.

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Issues: Whether unutilized Cenvat credit in the appellant's account lapsed on opting for exemption under a conditional exemption notification.

Analysis: The appeal turned on the construction of Rule 11(3) of the Cenvat Credit Rules, 2004. The exemption claimed under Notification No. 30/2004-CE was conditional, and not an absolute exemption under Section 5A of the Central Excise Act, 1944. Rule 11(3)(ii), which provides for lapse of balance credit, applies only where the final product is exempted absolutely. A conditional exemption falls within Rule 11(3)(i), which does not mandate lapsing of the credit balance. The earlier decision relied upon was followed on the same interpretation of the two sub-rules as distinct alternatives.

Conclusion: The unutilized Cenvat credit did not lapse, and the denial of its utilization was unsustainable.

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