Clarification on Cenvat credit reversal rules for input services under Rule 6(3A)(c)(iii) upheld on appeal.

The Tribunal clarified that the total Cenvat credit considered for reversal of ineligible credit under Rule 6(3A)(c)(iii) should only include common input services and not those used exclusively for dutiable goods. The appellant's method of calculating the reversal was upheld, overturning the Department's objection. The appeal was allowed, and the adjudication order for recovery and penalty was set aside in favor of the appellant based on established legal principles and previous Tribunal decisions.

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Issues:
1. Correct application of the formula under Rule 6(3A)(c)(iii) of the Cenvat Credit Rules, 2004 for reversal of ineligible credit.

Analysis:
The appellant, engaged in the manufacture of dutiable and exempted final products, availed Cenvat credit on input services used for both categories of goods during the disputed period of 2014-15. The appellant opted for reversal of Cenvat credit on a provisional basis as per Rule 6(3A)(b)(iii) due to the common use of input services. The Department objected to the appellant's method, arguing that the total Cenvat credit on all input services should be considered, not just the common input services. Show cause proceedings resulted in an adjudication order for recovery and penalty. The appellant contended that the factor "P" in the formula denotes 'total common Cenvat credit' and not 'total Cenvat credit', citing relevant Tribunal decisions.

The Tribunal analyzed the issue, referring to the decision in the case of Reliance Industries Ltd., which clarified that the term "total Cenvat Credit" in the formula under Rule 6(3) refers only to the total Cenvat credit of common input services and excludes the credit on input services exclusively used for dutiable goods. The Tribunal upheld this interpretation, emphasizing that disallowing credit for input services used in the manufacture of dutiable goods goes against the rules. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellant.

In conclusion, the Tribunal's decision clarified the correct interpretation of the formula under Rule 6(3A)(c)(iii) regarding the reversal of ineligible credit, emphasizing that the total Cenvat credit considered should only include common input services and not those used exclusively for dutiable goods. The appellant's approach was deemed correct based on established legal principles and previous Tribunal decisions, leading to the allowance of the appeal and the setting aside of the impugned order.

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