Appellant granted CENVAT credit reversal for exempted product inputs under Finance Act, 2010. Order set aside for reconsideration.

The Tribunal allowed the appellant to reverse CENVAT credit on inputs used for manufacturing exempted products following a retrospective amendment introduced by the Finance Act, 2010. The impugned order was set aside, and the matter was remanded to the adjudicating authority for reconsideration, emphasizing adherence to natural justice principles.

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Issues:
Reversal of CENVAT credit on service tax paid for manufacturing exempted and dutiable products.

Analysis:
The appeal was filed against the order-in-original No. 02/CEX/2008 dated 8.2.2008. The main issue revolved around the reversal of CENVAT credit taken by the appellant for service tax paid on input services used for manufacturing both exempted and dutiable final products. The appellant contended that they had taken the credit on a pro rata basis. However, the adjudicating authority disagreed, confirming the demand raised in the show-cause notice, imposing penalties, and directing the payment of interest on the confirmed amount.

Upon careful consideration, the Tribunal found that the issue of reversing CENVAT credit was related to exempted goods cleared by the assessee. A retrospective amendment through the Finance Act, 2010, concerning Rule 6 of the CENVAT Credit Rules, 2004, allowed for the reversal of CENVAT credit linked to inputs and input services, subject to the payment of interest and a Chartered Account's Certificate. The amendment enabled the appellant to benefit from the reversal of input credit on inputs used in manufacturing exempted products. Consequently, the Tribunal set aside the impugned order, remanding the matter to the adjudicating authority to reconsider the issue while adhering to the principles of natural justice. The appeal was disposed of accordingly.

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