Common inputs for exempted and dutiable goods require credit reversal when separate accounts are not maintained.

Where common inputs are used in the manufacture of both dutiable and exempted goods and separate accounts are not maintained, reversal under the Cenvat Credit Rules is mandatory. The Tribunal treated the relevant common inputs as the chemicals used across the factory, not molasses as an intermediate product, and found the exempted final product was made with those common inputs. As no separate accounting was maintained, the condition for reversal under Rule 6 was attracted. The demand for reversal was therefore sustained, and the duty, interest and penalty confirmed in the impugned order were upheld against the assessee.

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Issues: Whether the appellants were required to reverse 8% of the value of exempted goods for use of common inputs in terms of Rule 6(3)(b) of the Cenvat Credit Rules, 2002, where separate accounts for such inputs were not maintained.

Analysis: The appellants manufactured both dutiable and exempted goods and had not maintained separate accounts for common inputs used in the factory. The Tribunal held that the relevant common inputs were the chemicals used across the factory, not molasses, which was only an intermediate product. Since the exempted final product was manufactured with common inputs and separate accounting was absent, the condition for reversal under the Cenvat Credit Rules was attracted.

Conclusion: The demand for reversal was sustainable and the order confirming duty, interest, and penalty was upheld against the assessee.

Final Conclusion: The appeal was rejected and the assessee remained liable for the duty reversal and consequential reliefs determined in the impugned order.

Ratio Decidendi: Where common inputs are used for both dutiable and exempted goods and separate accounts are not maintained, reversal of credit or the prescribed percentage amount under the Cenvat Credit Rules is mandatory.

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