Cenvat credit on fuel for exempt steam was not refundable under Rule 6, as the fuel exclusion controlled.

Rule 6 of the Cenvat Credit Rules, 2001 barred credit on inputs used in exempted goods, and the separate-account exception in Rule 6(2) expressly excluded inputs intended for use as fuel. On that reading, furnace oil consumed as fuel for generating steam cleared outside the factory was not eligible for refund of the reversed credit. The claim for refund of the actual credit reversed on fuel was distinguished from cases involving 8% reversal on exempt final products, and those authorities were held inapplicable. The credit reversal was therefore correctly made and no refund was admissible.

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Issues: Whether Cenvat credit reversed on furnace oil used as fuel for generating steam cleared outside the factory was refundable under Rule 6 of the Cenvat Credit Rules, 2001.

Analysis: Rule 6(1) prohibits credit on inputs used in the manufacture of exempted goods, subject to the exception in sub-rule (2). Sub-rule (2), which requires separate accounts for inputs used in dutiable and exempted products, specifically excludes inputs intended to be used as fuel. The claim sought refund of the actual credit reversed on fuel consumed in generating exempt steam, not an 8% amount linked to exempt final goods. The earlier decisions cited by the assessee dealt with the 8% reversal under different rules and did not govern the present issue. On the proper reading of Rule 6(1) and Rule 6(2), the restriction on credit applied to the fuel used for exempt steam.

Conclusion: The reversal of credit was correctly made and no refund was admissible.

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