Cenvat credit availability under exemption notification depends on credit actually taken, not merely eligible credit.

For the purpose of Notification No. 39/2001-CE, only Cenvat credit actually taken and lying in the credit account could be treated as "credit available" for the requirement of first utilising the whole credit before paying duty in cash. Credit that was merely eligible to be taken, but was never availed, was not available credit within paragraph 2A, because the condition was aimed at preventing accumulation and misuse of credit. On that construction, rejection of the re-credit claim solely for non-availment of Cenvat credit was unsustainable, and the claimed re-credit was allowed.

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Issues: Whether, for the purpose of Notification No. 39/2001-CE, Cenvat credit that could have been taken but was not voluntarily taken can be treated as credit "available" to the manufacturer for applying the condition of first utilising the whole of the Cenvat credit before paying duty in cash.

Analysis: The notification granted a special area-based exemption to units in Kutch and, under paragraph 2A, required the manufacturer first to utilise the whole of the Cenvat credit available on the last day of the month before paying the balance duty in cash. The dispute turned on the meaning of the expression "credit available". The reasoning accepted that the restriction was meant to prevent accumulation and later misuse of credit, and that where no credit was taken at all, no such accumulation or misuse could occur. It was also noted that the quantum of refund did not change whether the credit was taken or not, and the Revenue did not dispute the appellant's calculation showing no extra benefit.

Conclusion: Credit that was merely eligible to be taken, but was never actually taken and stood unutilised in the credit account, was not "credit available" within paragraph 2A. The rejection of the re-credit claim on the ground of non-availment of Cenvat credit was unsustainable.

Final Conclusion: The exemption condition was construed in a manner consistent with its object, and the appellant was held entitled to the claimed re-credit.

Ratio Decidendi: For an exemption notification requiring first utilisation of "Cenvat credit available", only credit actually taken and lying available in the credit account is relevant; a notional credit that could have been availed but was not taken cannot be treated as available credit for denying the benefit.

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