Cenvat Credit on Capital Goods Allowed Where Dutiable Products Were Exempted Only for Specific Project Clearances

Capital goods Cenvat credit could not be denied under Rule 6(4) where the finished goods were otherwise dutiable and the exemption applied only to clearances made for a specified project. As the capital goods were not used exclusively for exempted goods or exempted services, Rule 6(4) was held inapplicable. The demand based on alleged inadmissible credit was therefore unsustainable, and the credit was rightly taken.

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Issues: Whether Cenvat credit on capital goods was rightly availed where the finished goods were dutiable, and exemption operated only for clearances made for a specified project.

Analysis: The appellant's finished goods under Heading 68109990 were held to be dutiable in the normal course, and the exemption under Notification No. 12/2012-CE applied only to supplies made for the specified project. On that basis, Rule 6(4) of the Cenvat Credit Rules, 2004 was found inapplicable because the capital goods were not used exclusively for exempted goods or exempted services. The adjudicatory demand premised on inadmissible credit was therefore unsustainable.

Conclusion: Cenvat credit on the capital goods was rightly taken and the show cause notice could not be sustained.

Ratio Decidendi: Where the final products are otherwise dutiable and exemption is limited to specific clearances, capital goods credit cannot be denied under Rule 6(4) merely because some supplies enjoy notification-based exemption.

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