Fuel exception under CENVAT credit law protects credit on furnace oil and LSHS used in both dutiable and exempted production.

Rule 6(2) of the CENVAT Credit Rules, 2004 exempts inputs intended for use as fuel from the requirement to maintain separate accounts for inputs used in exempted goods. On that basis, CENVAT credit on furnace oil or LSHS used as fuel in manufacturing both dutiable and exempted final products could not be denied merely because separate accounts were not kept. The Tribunal's view that such credit remained admissible was consistent with the statutory fuel exception, and the credit reversal sought by the Revenue was not sustainable.

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Issues: Whether CENVAT credit on furnace oil or LSHS used as fuel in the manufacture of both dutiable and exempted final products could be denied on the ground that separate accounts were not maintained.

Analysis: Rule 6(2) of the CENVAT Credit Rules, 2004 carves out an exception for inputs intended to be used as fuel. Where an input is used as fuel, the obligation to maintain separate accounts for inputs used in exempted goods does not apply. The Tribunal's view that credit could not be recovered in respect of fuel used in the manufacture of both duty-paid and exempted products was consistent with this exception.

Conclusion: The issue was decided against the Revenue and in favour of the assessee; CENVAT credit on furnace oil or LSHS used as fuel was admissible.

Final Conclusion: The appeal failed because the statutory fuel exception protected the assessee from reversal of credit on such inputs.

Ratio Decidendi: When an input is intended to be used as fuel, Rule 6(2) of the CENVAT Credit Rules, 2004 exempts the manufacturer from maintaining separate accounts and the related CENVAT credit cannot be denied merely because the fuel is used in producing both dutiable and exempted goods.

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