Cenvat credit allowed for integrated manufacturing plant where exempted output arose only as an incidental by-product.

Cenvat credit on capital goods was held admissible because the plant formed an integral part of the iron and steel manufacturing process and was not exclusively used to produce exempted goods. The Tribunal found that the equipment removed hazardous chemicals and gases from coke oven gas before its use in the final process, while ammonium sulphate emerged only incidentally as a by-product. Relying on the view that credit is available where machinery is not exclusively used for exempted goods, the Tribunal upheld the credit and rejected the Revenue's challenge.

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Issues: Whether Cenvat credit on capital goods was admissible when the plant was not exclusively used for manufacture of exempted goods and the exempted product emerged only as a by-product.

Analysis: The plant was found to be integral to the manufacture of iron and steel products, since it removed hazardous chemicals and gases from coke oven gas before that gas could be used in the final manufacturing process. The Tribunal held that the plant was not exclusively meant for manufacturing ammonium sulphate and that ammonium sulphate was only separated out as a by-product. The Tribunal also relied on the earlier coordinate bench view that credit is admissible where the machinery is not exclusively used for exempted goods.

Conclusion: Cenvat credit on the capital goods was admissible and the Revenue's challenge failed.

Final Conclusion: The order allowing credit was upheld and the Revenue's appeal was dismissed.

Ratio Decidendi: Credit on capital goods is allowable where the machinery is not exclusively used for exempted goods and is instead part of an integrated manufacturing process, even if an exempted product emerges incidentally as a by-product.

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