CENVAT credit on captive exempt intermediates allowed, and extended limitation rejected absent suppression or wilful misstatement.

CENVAT credit was held admissible on inputs used to manufacture captively consumed exempt intermediate goods, because bus bars and anode stems were treated as intermediate products in the manufacture of aluminium metal and credit cannot be denied merely due to non-dutiability at that stage. The Tribunal applied the principle that a product may be intermediate for one purpose and final for another, and captive consumption supported credit eligibility. The demand was also held time-barred because the assessee had disclosed its classification and manufacturing pattern in returns and classification lists, and no suppression, wilful misstatement, or deliberate withholding of facts was shown to justify the extended period. The assessee therefore succeeded on merits and limitation.

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Issues: (i) Whether CENVAT credit was admissible on inputs used in the manufacture of captively consumed intermediate goods that were exempted from duty. (ii) Whether the demand was barred by limitation and the extended period could be invoked.

Issue (i): Whether CENVAT credit was admissible on inputs used in the manufacture of captively consumed intermediate goods that were exempted from duty.

Analysis: The dispute turned on whether bus bars and anode stems, though exempt when captively consumed, were intermediate products in relation to the manufacture of aluminium metal. The applicable credit scheme recognized that credit could not be denied merely because an intermediate product or capital goods emerging in the course of manufacture was not dutiable. The Tribunal applied the settled principle that the same product may be a final product for one purpose and an intermediate product for another, and that captive consumption supports treatment as an intermediate product. On that basis, the inputs used to manufacture such captively consumed goods remained eligible for credit.

Conclusion: CENVAT credit was admissible, in favour of the assessee.

Issue (ii): Whether the demand was barred by limitation and the extended period could be invoked.

Analysis: The assessee had been filing classification lists and returns, and the department was aware of the manner of manufacture and captive use. In the absence of suppression, misstatement, or any deliberate withholding of material facts, invocation of the extended period was not justified. The Tribunal also accepted that the assessee's claim was supported by bona fide belief and by the prevailing legal position on credit eligibility for exempted intermediate goods.

Conclusion: The demand was time-barred and the extended period was not invocable, in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeal succeeded on both merits and limitation, with consequential relief as permissible in law.

Ratio Decidendi: Credit cannot be denied on inputs used to manufacture captively consumed exempt intermediate goods when such goods are integrally used in the manufacture of the dutiable final product, and the extended limitation period cannot be invoked absent suppression or wilful misstatement.

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