Exclusive use test: Cenvat credit allowed where capital goods produce intermediate for use in manufacture of dutiable final products.

Rule clarifies that Cenvat credit on capital goods is available where those goods are used to produce an intermediate (coke) that is captively consumed in the manufacture of dutiable final products; the statutory test is exclusive use for exempted goods, and where exclusive use for exempt manufacture is not established the restriction does not apply, resulting in entitlement to credit. The document states that denial under the exclusive-use provision is inapplicable on these facts and the credit must be allowed.

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Issues: Whether the respondent is entitled to avail Cenvat credit on capital goods used in manufacture of captively consumed intermediate goods (coke) which are ultimately used in the manufacture of dutiable final products; and whether Rule 6(4) of the Cenvat Credit Rules, 2004 applies to deny such credit.

Analysis: The Tribunal examined the factual finding that the capital goods in question were used to produce captive consumption goods (coke) which were subsequently consumed in the production of final dutiable goods. The legal framework involves Rule 6(4) of the Cenvat Credit Rules, 2004 which restricts credit where inputs or capital goods are used exclusively in manufacture of exempted goods. The Tribunal applied the statutory test of exclusive use and found on the facts that the capital goods were not used exclusively for manufacture of exempted final products but for producing an intermediate (coke) ultimately used in manufacture of dutiable goods. The Tribunal therefore held that the disallowance under Rule 6(4) was not attracted.

Conclusion: The respondent is entitled to avail Cenvat credit on the capital goods; Rule 6(4) of the Cenvat Credit Rules, 2004 does not apply to deny the credit in these facts. The appeal filed by the Revenue is dismissed and the impugned order upholding the credit is affirmed in favour of the assessee.

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