Retrospective Cenvat reversal scheme displaces 8% demand on exempted goods when attributable credit and interest are paid.

Retrospective Rule 57CCC relief was applied to common inputs used in dutiable and exempted final products, where the assessee had not maintained separate accounts but had reversed the credit attributable to exempted goods on a proportionate basis and paid applicable interest. The Tribunal treated the amendment as covering the period in dispute and noted that the statutory reversal scheme displaced a demand for 8% of the value of exempted goods. It also referred to condonability of delay in making the amendment-related application while remedies before the Tribunal were being pursued. The demand was therefore held unsustainable.

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Issues: Whether the demand of 8% of the value of exempted goods was sustainable where the assessee had reversed the Cenvat credit attributable to common inputs used for exempted final products and paid interest, in the light of the retrospective amendment and the statutory scheme for reversal.

Analysis: The dispute concerned common inputs used both for dutiable and exempted products, and the assessee had not maintained separate accounts. The Tribunal noted that the assessee had reversed the credit on a proportionate basis for the inputs used in exempted goods and had also paid interest at 24% per annum. It further noted that Rule 57CCC was inserted retrospectively by the Finance Act, 2010 to permit reversal of actual credit attributable to inputs used in exempted final products, and that the amendment covered the period in dispute. The Tribunal also relied on the view that delay in making the statutory application under the amendment scheme was condonable while the assessee was pursuing remedies before the Tribunal.

Conclusion: The demand of 8% of the value of exempted goods was not sustainable and was set aside in favour of the assessee.

Ratio Decidendi: Where the assessee reverses the credit attributable to common inputs used in exempted final products and pays the applicable interest, a retrospective statutory amendment permitting such reversal displaces a demand for payment of 8% of the value of the exempted goods.

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