Retrospective Cenvat Credit amendment made reversal of common input credit sufficient for exempted goods, not the earlier 8% formula.

Retrospective amendment to Rule 6 of the Cenvat Credit Rules, 2002 permitted an assessee manufacturing both dutiable and exempted goods to discharge the obligation by reversing credit attributable to common inputs used for exempted goods. Where the assessee had already reversed the total Cenvat credit on common inputs and the relevant period fell within the amended rule, the earlier 8% payment formula under Rule 6(3)(b) could not be insisted upon. The departmental demand was therefore not sustainable, and the assessee was not liable to pay 8% of the value of exempted goods.

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Issues: Whether the assessee was required to reverse 8% of the value of exempted final products under Rule 6(3)(b) of the Cenvat Credit Rules, 2002, or whether reversal of the total Cenvat credit attributable to common inputs was sufficient in view of the retrospective amendment to Rule 6.

Analysis: The assessee manufactured both dutiable and exempted final products and had reversed the total Cenvat credit availed on inputs used commonly for both categories. The dispute turned on the amended version of Rule 6, as introduced retrospectively by the Finance Act, 2010, which permitted payment of an amount equivalent to the credit attributable to inputs used in exempted goods. Since the period in question was covered by the amended rule and the reversal of total credit was undisputed, the departmental demand based on the earlier 8% formula was not sustainable.

Conclusion: The demand was not maintainable and the assessee was not liable to pay 8% of the value of exempted goods. The Revenue's appeal was dismissed.

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