Cenvat credit on fuel used to generate steam and electricity remains admissible despite use in exempted goods manufacture.

Cenvat credit was admissible on low sulphur heavy stock used as fuel to generate steam and electricity within the factory, because the governing credit rule expressly carved out a fuel exception. The fact that the steam and electricity were later used in relation to exempted goods did not justify denial of credit, since the input was not used as an input in the exempted goods themselves. The earlier binding view in the assessee's own case was followed, and the prior Central Excise Rules provision was treated as pari materia with Rule 6 of the Cenvat Credit Rules, 2002.

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Issues: Whether Cenvat credit is admissible on low sulphur heavy stock used as fuel for producing steam and electricity which are in turn used in relation to the manufacture of exempted goods.

Analysis: The applicable rule framework denied credit on inputs used in the manufacture of exempted goods, but specifically carved out an exception for inputs intended to be used as fuel. The Court followed the earlier binding decision in the assessee's own case and applied the same principle to hold that where low sulphur heavy stock is used as fuel for generating steam and electricity within the plant, credit cannot be denied merely because the electricity is also used in relation to exempted products. The relevant provision under the earlier Central Excise Rules was treated as pari materia with Rule 6 of the Cenvat Credit Rules, 2002.

Conclusion: Cenvat credit on the quantity of low sulphur heavy stock used for producing steam and electricity was admissible and the assessee's claim succeeded.

Ratio Decidendi: Inputs used as fuel for generating steam or electricity within the factory are outside the denial of credit for inputs used in exempted goods where the governing rule expressly carves out a fuel exception.

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