CENVAT credit on exempted goods under amended Rule 6(3) turns on clearance date, with remand for fresh claims.

Under the amended Rule 6(3) of the Cenvat Credit Rules, liability for exempted clearances was linked to clearance of the final products, not to the date on which input credit was originally taken. The Tribunal treated the amended scheme as requiring payment of an amount equivalent to the CENVAT credit attributable to inputs used in exempted goods, and rejected the contention that reversal of 8% of exempted value discharged that liability. It also noted that new claims on export under bond, captive consumption, and computation errors could be examined on remand after production of supporting documents and observance of natural justice.

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Issues: (i) Whether, after the amendment to Rule 6(3) of the Cenvat Credit Rules, 2002 with effect from 1.3.2002, the assessee manufacturing dutiable and exempted goods was liable to pay an amount equivalent to the CENVAT credit attributable to inputs used in exempted final products at the time of clearance, notwithstanding that the inputs had been received earlier and 8% of the value of exempted goods had been reversed; (ii) Whether the assessee's new claims regarding export under bond, captive consumption, and computation errors could be examined and the matter remanded for that purpose.

Issue (i): Whether, after the amendment to Rule 6(3) of the Cenvat Credit Rules, 2002 with effect from 1.3.2002, the assessee manufacturing dutiable and exempted goods was liable to pay an amount equivalent to the CENVAT credit attributable to inputs used in exempted final products at the time of clearance, notwithstanding that the inputs had been received earlier and 8% of the value of exempted goods had been reversed.

Analysis: The amended rule made a clear distinction between goods covered by the special clause and other exempted goods, and for the relevant exempted products the liability was linked to clearance of the final products. The date of taking credit on inputs was held to be irrelevant for determining the amount payable on exempted clearances. The claim that reversal of 8% of the value of exempted goods discharged the liability was rejected because the post-amendment scheme required payment of an amount equivalent to the CENVAT credit attributable to inputs used in, or in relation to, the manufacture of the exempted goods.

Conclusion: The issue was decided against the assessee.

Issue (ii): Whether the assessee's new claims regarding export under bond, captive consumption, and computation errors could be examined and the matter remanded for that purpose.

Analysis: These claims were raised for the first time before the Tribunal, but the Tribunal considered them for the ends of justice. It permitted the assessee to produce supporting documents before the original authority and directed that the authority examine eligibility and correctness of the claims after following natural justice.

Conclusion: The issue was decided in favour of the assessee to the extent of remand for fresh examination.

Final Conclusion: The substantive demand under the amended Rule 6(3) was upheld, but the matter was sent back for limited reconsideration of the additional claims and computation aspects.

Ratio Decidendi: Under the amended Rule 6(3), the liability for exempted clearances is determined by the law in force at the time of clearance of the final products, not by the date on which input credit was originally taken.

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