Cenvat credit on molasses may be used to pay duty on sugar absent any prohibition under the credit rules.

Cenvat credit availed on molasses could be utilised to pay central excise duty on sugar because Rule 3(3) of the Cenvat Credit Rules, 2001 permitted utilisation of validly availed credit for payment of duty on final products. The objection went only to utilisation, not to the original availment of credit, and there was no prohibition in the scheme against such use. The impugned order was therefore unsustainable, and the assessee succeeded.

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Issues: Whether cenvat credit availed on molasses could be utilised for payment of central excise duty on sugar.

Analysis: The only objection raised was to utilisation of credit, not to the availment of credit on molasses. Rule 3(3) of the Cenvat Credit Rules, 2001 permitted utilisation of the credit availed by a manufacturer for payment of duty on final products. The same issue had already been answered by the Bombay High Court, on the assessee's favour, holding that credit earned on molasses could be used towards payment of duty on sugar.

Conclusion: The issue is decided in favour of the assessee and against the Revenue.

Final Conclusion: The impugned order could not be sustained and the assessee's appeal succeeded.

Ratio Decidendi: In the absence of any prohibition, credit validly availed under the Cenvat scheme may be utilised for payment of duty on final products in terms of the applicable utilisation rule.

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