CENVAT credit reversal under Rule 6(3D) can satisfy exemption conditions where credit is deemed not taken.

Concessional exemption under Notification No. 1/2011-C.E. remained available where the assessee either maintained separate records and did not take CENVAT credit on inputs and input services, or reversed proportionate credit attributable to exempted clearances under Rule 6(3A), because Rule 6(3D) deems such payment to be credit not taken for purposes of the exemption. The denial of the concession was unjustified because the adjudicating authority ignored this statutory deeming fiction while treating the exemption condition as breached.

---

---

Issues: Whether the assessee was entitled to the concessional exemption under Notification No. 1/2011-C.E. where separate accounts were maintained for inputs and input services and proportionate credit attributable to the exempted final products was reversed under Rule 6(3D) of the Cenvat Credit Rules, 2004.

Analysis: The exemption notification was conditional upon non-availment of CENVAT credit on inputs and input services. For one period, the assessee had maintained separate records and had not taken credit; for the remaining period, separate records were maintained for inputs and proportionate credit relating to input services was reversed in terms of Rule 6(3A), and such payment is deemed by Rule 6(3D) to be CENVAT credit not taken for the purpose of an exemption notification. The adjudicating authority failed to consider this statutory deeming provision while denying the concession.

Conclusion: The denial of exemption was not justified and the assessee was held entitled to the concession.

---