Cenvat credit on exempted waste demands fresh verification where alleged common inputs and input services remain disputed.

Rule 6(3) of the Cenvat Credit Rules, 2004 could not be applied to yarn/fibre waste unless the appellant had actually availed Cenvat credit on common inputs or input services used in relation to the exempted clearances. It was undisputed that no credit was taken on polyester fibre, and the use of packing materials, GTA services and foreign commission agent services was said to relate to export consignments. The critical factual question was whether credit had in fact been taken on dyes and chemicals used in manufacture; as that position could be verified from the record, the demand could not be finally sustained on the existing record. The order was set aside and the matter remanded for de novo adjudication.

---

---

Issues: Whether the demand under Rule 6(3) of the Cenvat Credit Rules, 2004 could be sustained in respect of yarn/fibre waste where no Cenvat credit was admittedly taken on the principal fibre and the alleged common inputs or input services were disputed.

Analysis: The dispute turned on whether the appellant had actually availed Cenvat credit on any inputs such as dyes and chemicals used in the manufacture of the spun yarn and whether any such inputs or common input services were used in relation to the exempted waste. It was undisputed that no credit had been taken on polyester fibre and that the packing materials, GTA services and foreign commission agent services were used for export consignments. If no credit had been taken on dyes and chemicals, the foundation for invoking Rule 6(3) against clearance of waste would fail. As the existence of any such credit could be verified from the records, the factual position required fresh examination.

Conclusion: The demand could not be finally sustained on the existing record, the order was set aside, and the matter was remanded for de novo adjudication.

---