Rule 6(3) Cenvat Credit dispute remanded where exempted clearance and common input use were not properly examined.

Rule 6(3) of the Cenvat Credit Rules could not be sustained without first examining whether the assessee was actually clearing Ayurvedic medicines under a concessional notification and whether common inputs or input services were used. The appellate authority had not properly considered the plea that the medicines were not exempted goods and that no Cenvat credit had been availed. Because the factual foundation for applying the separate accounts requirement remained unresolved, the order was set aside and the matter remanded to the original adjudicating authority for denovo adjudication.

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Issues: Whether the demand based on Rule 6(3) of the Cenvat Credit Rules could be sustained when the factual position regarding clearance of Ayurvedic medicines under a concessional notification and the use of common inputs or input services had not been properly examined.

Analysis: The appellants asserted that they were not manufacturing exempted goods, but were clearing Ayurvedic medicines under Notification No. 1/2011-CE at a concessional or notified rate of duty and without availing Cenvat credit. It was also pointed out that the plea had not been considered by the appellate authority. In the circumstances, the factual foundation for invoking the requirement of separate accounts under Rule 6(3) had not been correctly appreciated, and the matter required fresh examination.

Conclusion: The impugned order was set aside and the matter was remanded to the original adjudicating authority for denovo adjudication.

Ratio Decidendi: Where the applicability of Rule 6(3) depends on unresolved facts concerning exempted clearance and use of common inputs or input services, the matter must be remanded for fresh adjudication.

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