CENVAT credit reversal under common inputs does not apply when credit is taken only on actual use and exports are under bond.

CENVAT credit reversal under Rule 6(3) was not attracted where inputs were stored and accounted for batch-wise, and credit was taken only on the proportionate quantity actually used in dutiable manufacture or in exempted goods exported under bond. On those facts, there was no common input credit to trigger the reversal mechanism. Exempted goods cleared for export under bond also fell within Rule 6(6), which carves such exports out of the restriction in Rule 6(1) to Rule 6(4). Accordingly, no reversal of credit was payable on the export clearances, and the demand, interest, and penalty could not survive.

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Issues: (i) whether CENVAT credit was taken on common inputs so as to attract reversal under Rule 6(3) of the Cenvat Credit Rules, 2004; (ii) whether exempted goods exported under bond required reversal of credit or fell within Rule 6(6) of the Cenvat Credit Rules, 2004.

Issue (i): whether CENVAT credit was taken on common inputs so as to attract reversal under Rule 6(3) of the Cenvat Credit Rules, 2004

Analysis: The credit was not availed at the stage of receipt of inputs as a common pool credit. The inputs were stored and accounted for batch-wise, and credit was taken only on the proportionate quantity actually used in the manufacture of dutiable products or in the manufacture of exempted products exported under bond. On that factual basis, there was no common input credit capable of triggering the reversal mechanism under Rule 6(3).

Conclusion: The requirement to reverse credit under Rule 6(3) was not attracted.

Issue (ii): whether exempted goods exported under bond required reversal of credit or fell within Rule 6(6) of the Cenvat Credit Rules, 2004

Analysis: Rule 6(6) carves out clearances for export under bond from the general restrictions in Rule 6(1) to Rule 6(4). The export of exempted goods under bond therefore remained outside the reversal obligation. The reasoning was also supported by the prior view followed in the matter and by the principle that export clearances under bond are exempted from the reversal requirement.

Conclusion: No reversal of CENVAT credit was payable on exempted goods exported under bond.

Final Conclusion: The demand, interest, and penalty could not survive, and the assessee was entitled to relief.

Ratio Decidendi: Where credit is availed only on the actual inputs consumed for identifiable dutiable manufacture or for exempted goods exported under bond, there is no common input credit and Rule 6(3) does not apply; exports under bond are protected by Rule 6(6).

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