Credit reversal for exempted goods fails where separate records are absent and non-availment of input credit is unproven.

Under Rule 57AD(2)(b) of the Central Excise Rules, 1944, a claim that no credit was taken on inputs used for exempted goods must be supported by separate records or proof. Here, the assessee asserted that the inputs were procured from the open market and that no credit was availed, but produced no contemporaneous evidence to show separate procurement without credit. The explanation that the matter was old and records were unavailable did not substantiate the claim. In the absence of supporting evidence, the demand was upheld and the appeal was dismissed.

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Issues: Whether the demand confirmed under Rule 57AD(2)(b) of the Central Excise Rules, 1944 was unsustainable for want of evidence that no credit had been availed in respect of inputs used in the manufacture of exempted goods.

Analysis: The claim of the assessee was that credit had not been taken on the inputs used for exempted goods and that the inputs were procured from the open market. However, no supporting records were produced to establish that the inputs for exempted goods were separately procured without availment of credit. The assessee also stated that, being an old matter, such records could not be produced. In the absence of any separate record or proof, the contention that no credit had been taken remained unsubstantiated.

Conclusion: The demand was upheld and the appeal was dismissed against the assessee.

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