CENVAT credit reversal for exempted clearance barred further 8% payment where only one final product was manufactured.

Rule 6(3)(b) of the CENVAT Credit Rules, 2002 applied only where a manufacturer produced both dutiable and exempted final products using common inputs. Here, the assessee manufactured only one final product, and the exemption related only to a particular clearance, so the statutory condition for the 8% payment was absent. As the credit attributable to the exempted consignment had already been reversed, the further demand was not sustainable under the CENVAT scheme.

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Issues: Whether Rule 6(3)(b) of the CENVAT Credit Rules, 2002 required payment of an amount equal to 8% of the sale price of exempted clearances where the assessee manufactured only one category of final product and had already reversed the credit relatable to inputs used in the exempted consignment.

Analysis: The rule was held applicable only where a manufacturer produced both dutiable and exempted final products using common inputs. On the facts, the assessee manufactured only gear boxes, and the exemption applied only to a particular clearance. Since no two categories of final products existed, the statutory condition for applying the percentage payment under Rule 6 was absent. The credit relatable to the exempted consignment had already been reversed, and the CENVAT scheme did not justify the further demand.

Conclusion: Rule 6(3)(b) did not apply, and the demand for 8% of the sale price was not sustainable.

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