Rule 6 Cenvat credit reversal and retrospective amendment required fresh adjudication on common input use.

Rule 6 of the Cenvat Credit Rules was applied to common inputs used in both exempted and duty-paid goods, where demand had been confirmed for non-maintenance of separate records and payment of a percentage of the exempted goods' value. The retrospective amendment by the Finance Act, 2010 introduced an option to reverse credit attributable to inputs used in exempted goods, subject to verification by the Commissioner of Central Excise. In view of this changed legal position, the earlier adjudication required reconsideration and the matter was remanded for fresh decision after hearing the appellant.

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Issues: Whether the demand and penalty under Rule 6 of the Cenvat Credit Rules were liable to be sustained in view of the retrospective amendment introduced by the Finance Act, 2010, and whether the matter required reconsideration by the adjudicating authority.

Analysis: The appellant was taking credit on common inputs used for both exempted and duty-paid goods. The demand had been confirmed on the footing that separate records were not maintained and 10% of the price of exempted goods was payable under Rule 6(3)(b) of the Cenvat Credit Rules. The retrospective amendment to Rule 6 by the Finance Act, 2010 provided an option to reverse the credit attributable to inputs used in exempted goods, with a prescribed procedure for verification by the Commissioner of Central Excise. In light of this changed legal position, the existing adjudication required reconsideration.

Conclusion: The impugned order was set aside and the matter was remanded to the adjudicating authority for fresh decision after granting opportunity of hearing.

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