Proportionate Cenvat credit reversal for common input services in trading accepted on remand, with related issues left open.

Common input services used for manufacture, trading and export were examined under Rule 6(3) of the Cenvat Credit Rules, where the dispute concerned whether the demand for trading-related credit should stand or whether proportionate reversal should be permitted. The assessee was willing to reverse the credit if the matter was remanded, and the Revenue did not object. The previous treatment of identical demands on the basis of proportionate reversal was noted, while the questions whether export constituted an exempted service and the limitation plea were left for reconsideration. The impugned order was set aside and the matter remanded to enable reversal of proportionate credit for input services used in trading.

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Issues: Whether the demand raised under Rule 6(3) of the Cenvat Credit Rules for common input services used in trading activity was liable to be sustained, or whether the matter should be remanded to permit reversal of proportionate credit.

Analysis: The assessee was engaged in manufacture, trading, and export, and the dispute arose on the premise that common input services had been used for dutiable as well as exempted trading activity. It was noted that in an earlier period identical demands had been set aside on the basis that proportionate credit had been reversed. The assessee expressed readiness to reverse the credit if the matter was sent back for that purpose, and the Revenue did not oppose the request. The question whether export was an exempted service and the plea of limitation were left open for reconsideration by the adjudicating authority.

Conclusion: The impugned order was set aside and the matter was remanded to enable reversal of proportionate credit relating to input services used for trading purposes. The appeal was allowed by way of remand.

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