2011 (4) TMI 950 - HC - Central Excise

High Court upholds Tribunal decision on exempted products reversal, citing retrospective amendment.

The High Court dismissed the revenue's appeal challenging the Tribunal's decision on the need for reversal of 8% of the sale value of exempted products. ... Whether the assessee was entitled to the benefit of CESTAT credit while admittedly the assessee has not maintained the accounts as stipulated under Rule 6 of the CENVAT Credit Rules - Once the cenvat credit taken is reversed, there is no liability to pay excess duty at 8% or penalty, interest as directed by the Assessing Authority, appeal are answered in favour of the assessee and against the revenue. No merit in this appeal and accordingly, it is dismissed Issues:1. Challenge to Tribunal's order regarding reversal of credit for exempted products.2. Applicability of Cenvat credit and reversal of 8% of sale value.3. Interpretation of Rule 6 of Cenvat Credit Rules.4. Impact of retrospective amendment to Rule 6 on the case.Analysis:1. The appeal was filed by the revenue challenging the Tribunal's decision on the need for reversal of 8% of the sale value of exempted products when the credit attributable to inputs used in those products is reversed. The Tribunal, relying on a previous judgment, dismissed the revenue's appeal. The High Court considered this issue.2. The assessee, a pig iron manufacturer, took Cenvat credit on inputs used and cleared pig iron on duty payment basis using CT-3 certificates. The revenue argued that the assessee should have reversed 8% of the sale value of goods and imposed a penalty. The Tribunal upheld the Commissioner (Appeals) decision based on the Larger Bench judgment in Nicholas Piramal (India) Ltd. case. The High Court analyzed this issue.3. The High Court admitted the appeal to consider whether the assessee was entitled to Cenvat credit benefits despite not maintaining accounts as per Rule 6 of the Cenvat Credit Rules. During the appeal, the Finance Act, 2010 retrospectively amended Rule 6 from July 2001 to September 2004. The Court discussed the impact of this amendment on the case and the liability for excess duty and penalties.4. The retrospective amendment to Rule 6, providing for the reversal of Cenvat credit, was crucial in this case. The Court held that once the credit is reversed, there is no obligation to pay excess duty or penalties as directed by the Assessing Authority. The amendment's retrospective nature covered the case, leading to a dismissal of the revenue's appeal. The substantial questions of law were resolved in favor of the assessee due to the retrospective effect of the amendment, resulting in the appeal's dismissal.