In Brief
The Supreme Court resolved a conflict in CENVAT Credit law concerning whether manufacturers of duty-exempt goods can claim credit for duty paid on fuel inputs. The assessee used Low Sulphur Heavy Stock (LSHS) to generate steam and electricity for manufacturing exempt fertilizer, and claimed CENVAT credit on the fuel. The Court held that Rule 6(1) of the CENVAT Credit Rules, 2002 is a foundational rule prohibiting credit on inputs used in exempt-goods manufacture. Although Rule 6(2) excludes fuel from separate-accounting requirements, this exclusion does not exempt fuel from Rule 6(1)'s credit prohibition. Therefore, CENVAT credit is denied on fuel inputs used in exempt-goods manufacture, regardless of exemption from accounting rules. The appeals were allowed.
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