Retrospective Rule 6 amendment shields reversed cenvat credit on common inputs used in exempted goods, nullifying the demand.

CESTAT Ahmedabad held that where an assessee had availed cenvat credit on common inputs used for both dutiable and exempted goods and had reversed the credit relatable to exempted products, the demand to pay 8% or 10% of the value of exempted clearances was not sustainable. The dispute was treated as covered by the retrospective amendment to Rule 6 of the Cenvat Credit Rules, 2002 and Rule 6 of the Cenvat Credit Rules, 2004 introduced by the Finance Act, 2010, and by the Tribunal's earlier decision relied on by the appellant. The impugned orders were set aside.

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Issues: Whether the appellant, having reversed the cenvat credit attributable to common inputs used in exempted goods, was still required to pay 8% or 10% of the value of the exempted goods cleared from the factory.

Analysis: The appellant had availed cenvat credit on common inputs used in the manufacture of both dutiable and exempted goods and had been reversing the credit relatable to the inputs consumed in exempted products. In view of the retrospective amendment to Rule 6 of the Cenvat Credit Rules, 2002 and Rule 6 of the Cenvat Credit Rules, 2004 brought in by the Finance Act, 2010, the dispute stood covered in favour of the assessee. The position was also held to be covered by the Tribunal's earlier decision relied upon by the appellant, and the issue was treated as no longer res integra.

Conclusion: The demand to pay 8% or 10% of the value of exempted goods was not sustainable and the impugned orders were set aside.

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