Retrospective Rule 6 amendment and reversal of common input credit defeated demand on exempted clearances.

Cenvat credit on common inputs used in both dutiable and exempted goods was reversed to the extent attributable to exempted products, and that undisputed reversal brought the dispute within the retrospective amendment to Rule 6 made by the Finance Act 2010. The Tribunal treated the issue as covered by its earlier ruling and held that, in these circumstances, a demand based on non-reversal of 8% or 10% of exempted clearances could not be sustained. The adverse order was therefore set aside and relief followed for the assessee.

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Issues: Whether reversal of Cenvat credit attributable to common inputs used in exempted goods, in the context of the retrospective amendment to Rule 6 of the Cenvat Credit Rules, sustained the appellant's claim against the demand of 8% or 10% on the value of exempted clearances.

Analysis: The appellant had availed Cenvat credit on common inputs used for both dutiable and exempted goods and had been reversing the credit relatable to inputs consumed in the exempted products. Since such reversal was not disputed, the retrospective amendment made by the Finance Act, 2010 to Rule 6 of the Cenvat Credit Rules, 2002 and 2004 governed the controversy. The issue was treated as covered by the earlier Tribunal decision relied upon, which supported the assessee's position.

Conclusion: The demand could not be sustained and the impugned order was liable to be set aside in favour of the assessee.

Final Conclusion: The appeal succeeded and the assessee obtained relief against the adverse order on the disputed Cenvat credit issue.

Ratio Decidendi: Where Cenvat credit attributable to common inputs used in exempted goods is reversed and the statutory amendment operates retrospectively, the demand based on non-reversal cannot be sustained.

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