Retrospective CENVAT amendment barred further reversal once input credit for exempted goods was reversed.

The retrospective amendment to Rule 6 of the CENVAT Credit Rules by the Finance Act, 2010 applied to the relevant periods, and once the credit attributable to inputs used in exempted goods had been reversed, the basis for any further demand did not survive. The Court held that the assessee could retain the benefit of CENVAT credit without maintaining the accounts contemplated under Rule 6 in these circumstances, so the additional requirement to reverse 8% of the exempted goods' sale value, together with penalty and interest, was unsustainable. The issue was answered in favour of the assessee and against the revenue.

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Issues: Whether the assessee was entitled to retain the benefit of CENVAT credit without maintaining the accounts contemplated under Rule 6 of the CENVAT Credit Rules, when the credit attributable to inputs used in the exempted product had been reversed.

Analysis: The retrospective amendment to Rule 6 of the CENVAT Credit Rules by the Finance Act, 2010 was held to apply to the relevant periods. Once the credit taken on inputs was reversed, the basis for demanding further reversal of 8% of the sale value of the exempted goods, along with penalty and interest, did not survive. The amendment was treated as curing the controversy for the periods in question.

Conclusion: The question was answered in favour of the assessee and against the revenue.

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