Retrospective Cenvat Credit Amendment Required Fresh Review of Proportionate Reversal for Exempted Goods

Retrospective amendment to Rule 6 of the Cenvat Credit Rules, 2002 required fresh examination of the amount payable on inputs used in exempted goods on a proportionate basis, where a manufacturer availed credit for both dutiable and exempted goods. The Tribunal held that the original adjudication could not stand on the amended legal position because the effect of the Finance Act, 2010 amendment and the appellant's reversal of credit had not been properly examined. The impugned order was set aside and the matter was remanded for de novo adjudication in accordance with the amended rule.

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Issues: Whether the demand raised under Rule 6(3) of the Cenvat Credit Rules, 2002 could survive in view of the retrospective amendment brought by the Finance Act, 2010 and the appellant's reversal of credit attributable to exempted goods.

Analysis: The Tribunal noted that the appellant was manufacturing both dutiable and exempted goods and had been availing Cenvat credit on inputs. The case turned on the effect of the retrospective amendment to Rule 6, under which the manufacturer is required to pay an amount relatable to the credit attributable to inputs used in exempted goods on a proportionate basis. Since the Revenue fairly conceded that the matter required reconsideration in light of the amended rule, the original adjudication was found not to be final on the amended legal position and the evidence regarding Cenvat credit and interest liability required fresh examination.

Conclusion: The impugned order was set aside and the matter was remanded for de novo adjudication in accordance with the amended Rule 6 of the Cenvat Credit Rules, 2002.

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