Fuel exclusion under Cenvat credit rules protects credit on furnace oil used in manufacturing exempted goods.

Cenvat credit on furnace oil, RFO and LDO used as fuel in manufacturing exempted goods was not required to be reversed. The Tribunal applied the fuel exclusion under the Cenvat credit rules and held that inputs intended for use as fuel fall outside the reversal mechanism, even where the manufacturer clears both dutiable and exempted products. It followed the Division Bench view that credit on furnace oil used as fuel is admissible and cannot be denied merely because exempted goods are also manufactured. Revenue's challenge therefore failed.

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Issues: Whether Cenvat credit taken on furnace oil, RFO and LDO used as fuel in the manufacture of exempted goods was required to be reversed.

Analysis: The dispute turned on the effect of the exclusion for fuel under the Cenvat credit scheme. The Tribunal held that the relevant rules specifically exclude inputs intended to be used as fuel from the operation of the reversal provisions, even where the manufacturer clears both dutiable and exempted goods. It found the Commissioner (Appeals) had correctly applied the law and followed the Division Bench view that credit on furnace oil used as fuel was not liable to reversal.

Conclusion: Credit on furnace oil, RFO and LDO used as fuel was not required to be reversed; the challenge by Revenue failed.

Ratio Decidendi: Where the Cenvat credit rules expressly exclude fuel from the reversal mechanism, credit taken on inputs used as fuel in the manufacture of exempted goods cannot be denied merely because the manufacturer also produces exempted goods.

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