CENVAT credit is allowable where capital goods are not exclusively used for exempt goods.

The appellant manufactured biscuits, including goods that were dutiable and biscuits with an MRP below ₹100 per kg, which were exempt from duty under Notification No. 3/2006-C.E., as amended by Notification No. 12/2012-C.E.

The Department issued a show-cause notice demanding reversal of ₹72,56,659 in CENVAT credit availed on capital goods, inputs and input services during July 2010 to March 2015, with interest and penalty; the lower authorities confirmed the demand.

The appellant appealed, arguing that the capital goods were not used exclusively to manufacture exempt goods, that credit on inputs and input services had been taken proportionately, and that the extended period was unavailable because the credit details had been disclosed in its records and returns.

Whether the appellant was eligible to retain CENVAT credit on capital goods, inputs and input services used in a factory manufacturing both dutiable and exempted goods.

Whether the extended period could be invoked where the appellant had disclosed the credit in its statutory records and returns.

Section 4A of the Central Excise Act, 1944, and the relevant notifications governed valuation by MRP and the exemption for biscuits with an MRP below ₹100 per kg.

Under Rule 6(4) of the CENVAT Credit Rules, 2004, credit on capital goods is barred where those goods are used exclusively to manufacture exempted goods.

The Tribunal also applied the principle that the extended period cannot be sustained absent suppression of facts or wilful misstatement, particularly where the material credit details were disclosed in the assessee’s statutory records and returns.

The Tribunal found that the appellant manufactured both dutiable and exempted goods and that the Department had produced no evidence that it did not manufacture dutiable goods. Since the capital goods were therefore not shown to have been used exclusively for exempted goods, Rule 6(4) did not justify denying credit on them.

As to inputs and input services, the Tribunal considered the comparatively small amounts of credit, in light of the appellant’s substantial turnover, consistent with the appellant’s claim that it had taken credit only proportionately for dutiable goods.

It also found that the credit was disclosed in the RG-23C register and ER-1 returns, including the return for February 2015; accordingly, suppression or wilful misstatement was not established.

It allowed the appeal and granted consequential relief, if any.