Tribunal upholds reversal of cenvat credit for exempted goods, sets aside demand beyond limitation.

The Tribunal upheld the Ld. Commissioner (A)'s ruling on the reversal of cenvat credit for inputs used in manufacturing exempted final goods. The demand for the normal period of reversal of cenvat credit along with interest was confirmed against the assessee, and the appeal filed by the Revenue was dismissed. The Tribunal set aside the demand pertaining to the period beyond the limitation, finding it acceptable as per the assessee's contention.

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Issues: Appeal against demand of 10% value of exempted final goods, reversal of cenvat credit on inputs for exempted goods.

Analysis:
The case involved an appeal against an order demanding payment of 10% of the value of exempted final goods by the assessee, who had cleared such goods to another unit for R&D purposes without maintaining separate accounts for inputs used in their manufacture. A show cause notice was issued invoking the extended period of limitation. The adjudicating authority confirmed the demand along with interest and penalty. The assessee appealed to the Ld. Commissioner (A), who held that the assessee must reverse the cenvat credit attributable to inputs used for manufacturing exempted final goods. The Ld. Commissioner (A) confirmed the demand for reversal of cenvat credit while dropping the remaining demand. Both the assessee and the Revenue filed appeals against this order, which were taken up together for final disposal.

The Tribunal noted that the assessee had been filing regular ER-1 returns showing exempted goods cleared without duty payment and availing cenvat credit on inputs. The Tribunal found that some part of the demand beyond the limitation period was acceptable as per the contention of the assessee. Consequently, the demand pertaining to the period beyond the limitation was set aside. The main issue for consideration was whether the Ld. Commissioner (A) was correct in extending the benefit of reversing cenvat credit on inputs used for manufacturing exempted final goods. The Tribunal observed that the Finance Act, 2010 provided the option for the assessee to reverse cenvat credit attributable to inputs used for exempted final goods. Therefore, the Tribunal held that the Ld. Commissioner (A) was right in extending this benefit. Consequently, the appeal filed by the Revenue was dismissed, and the demand for the normal period of reversal of cenvat credit along with interest was confirmed against the assessee.

In conclusion, the appeals were disposed of with the above terms, and the Tribunal's decision upheld the Ld. Commissioner (A)'s ruling on the reversal of cenvat credit for inputs used in manufacturing exempted final goods.

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