Cenvat credit reversal for common inputs used in exempted and dutiable goods requires quantification, not automatic percentage demand.

Where common Modvat/Cenvat credit inputs are used in the manufacture of both exempted and dutiable biscuits, the credit relatable to exempted clearances may be quantified at the appellate stage rather than sustaining a percentage-based demand under Rule 6. The Tribunal noted that the assessee did not dispute common use of inputs, but sought redetermination of the reversible credit attributable to exempted goods. It therefore held that the proper course was quantification of the credit and interest to be reversed, with an opportunity of hearing, instead of confirming the demand on the value of exempted products. The matter was remanded to the original adjudicating authority for that purpose.

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Issues: Whether, where common Modvat/Cenvat credit inputs were used in the manufacture of both exempted and dutiable biscuits, the assessee could be directed at the appellate stage to reverse the credit relatable to exempted clearances instead of sustaining demand under Rule 6 at 10% of the value of exempted products, and the matter remanded for quantification.

Analysis: The biscuits were cleared under exemption notifications and the dispute arose because common inputs had been used for both exempted and dutiable final products. The Tribunal noted that the assessee did not dispute common use of inputs, but sought redetermination of the credit attributable to exempted goods. Relying on the legal position that the quantum of credit to be reversed can be determined even at the appellate stage, the Tribunal held that the matter required quantification rather than mere confirmation of the percentage-based demand.

Conclusion: The impugned order was set aside and the matter was remanded to the original adjudicating authority to quantify the credit and interest required to be reversed after giving the assessee an opportunity of hearing.

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