Cenvat credit on capital goods barred for exclusive manufacture of exempted goods, despite exemption notification wording.

Cenvat credit on capital goods was unavailable where a manufacturer cleared cotton yarn only under Notification No. 30/2004-CE without payment of duty and did not clear any other dutiable goods. Rule 6(4) of the CENVAT Credit Rules, 2002 barred credit on capital goods used exclusively in the manufacture of exempted goods, and the corrigendum deleting the capital-goods wording from the notification did not change that position because the notification contemplated such credit only where dutiable clearances also existed. The denial of credit was therefore upheld and the appeal failed.

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Issues: Whether credit on capital goods was admissible when the manufacturer cleared cotton yarn only under Notification No. 30/2004-CE without payment of duty.

Analysis: The admitted position was that the goods were cleared only under the exemption notification and the appellants were not clearing any other goods on payment of duty. Rule 6(4) of the CENVAT Credit Rules, 2002 barred Cenvat credit in respect of capital goods used exclusively in the manufacture of exempted goods. The corrigendum deleting the words relating to capital goods from the notification did not alter this position, because the notification itself contemplated availment of credit on capital goods only where the manufacturer was also clearing dutiable goods.

Conclusion: Credit on capital goods was not admissible and the denial of credit was upheld against the assessee.

Final Conclusion: The appeal failed and the impugned denial of capital goods credit remained undisturbed.

Ratio Decidendi: Where capital goods are used exclusively in the manufacture of goods cleared without payment of duty, Cenvat credit on such capital goods is barred notwithstanding the wording of the exemption notification.

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