2026-VIL-1228-GUJ-CE
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CENTRAL EXCISE High Court Cases

Central Excise - Availment of proportionate CENVAT credit on common inputs used in the manufacture of dutiable final products and exempted by-products - Liability to pay an amount under Rule 6(3)(b) of the CENVAT Credit Rules, 2004 - The Respondent-assessee manufactured dutiable and non-dutiable products and used common inputs in the manufacture, but availed CENVAT credit only in proportion to the dutiable products on the basis of a chartered accountant certificate - The Adjudicating Authority held that the methodology was not compatible with Rule 6 and confirmed the demand of ten per cent of the price of the exempted by-products under Rule 6(3)(b) read with Rule 14 - The CESTAT allowed the appeal, holding that taking credit proportionate to the dutiable products amounts to not taking credit - Whether an Respondent-assessee is entitled to follow a system different from the system provided under the Rules - HELD - The issue is squarely covered in favour of the assessee by the decision of the Apex Court, which held that the requirement of separate records does not apply where the by-product emerges as a technological necessity and no part of the input can be traced in the by-product - Under Rule 6(1), CENVAT credit is admissible on inputs used in the manufacture of dutiable goods and inadmissible on the quantity used in the manufacture of exempted goods. Where the entire quantity of input is used in the manufacture of the final product, the mere fact that a by-product emerges does not bring the by-product within Rule 6 so as to call for separate accounts or payment of an amount on the exempted goods - Where the assessee has taken credit only on the quantity of input intended for use in the manufacture of dutiable goods, the question of invoking Rule 6 does not arise. It is immaterial whether the Rules of 2002 and 2004 contain provisions akin to the earlier rules. Although the CESTAT has not given elaborate reasons, it has arrived at a conclusion as per the settled legal position - The questions are answered in favour of the assessee and the Revenue appeal is dismissed
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