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Issues: Whether furnace oil and LSHS used as fuel in the manufacture of electricity for use in producing both dutiable and exempted final products attracted reversal of CENVAT credit under Rule 6 of the CENVAT Credit Rules, 2002.
Analysis: Rule 6 of the CENVAT Credit Rules, 2002 restricts credit on inputs used in exempted goods, but the rule specifically carves out an exception for inputs intended to be used as fuel. The inputs in question were used as fuel in the HFO plant for generating electricity, and the Tribunal noted that the same legal position had already been applied in earlier decisions, including cases dealing with furnace oil used for generation of electricity and steam. In view of that settled interpretation, no reversal of credit or consequential demand could be sustained on fuel inputs used in the manufacturing process, even where the final products included exempted goods.
Conclusion: The fuel-based inputs were outside the mischief of Rule 6, and the Revenue's challenge to the allowance of CENVAT credit failed.
Final Conclusion: The order allowing credit was sustained and the Revenue's appeal was rejected.
Ratio Decidendi: Inputs used as fuel are excluded from the restriction on CENVAT credit under Rule 6 of the CENVAT Credit Rules, 2002, so credit need not be reversed merely because the resulting electricity is used in the manufacture of both dutiable and exempted goods.
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