Rule 6(3) Cenvat demand requires proper factual inquiry where separate accounts and credit reversal are claimed.

Where an assessee claims to have maintained separate Cenvat accounts for dutiable and exempted goods and to have reversed proportionate credit on common inputs, a demand under Rule 6(3) cannot be finally confirmed without a proper factual inquiry into those claims. The record showed that these assertions were not examined in detail by the lower authorities, so the factual basis for the demand and the effect of credit reversal required reconsideration. The order was set aside and the matter remanded for fresh adjudication with all connected issues to be re-examined.

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Issues: Whether the demand under Rule 6(3) of the Cenvat Credit Rules was sustainable when the assessee claimed to have maintained separate Cenvat accounts for dutiable and exempted goods and to have reversed proportionate credit on common inputs.

Analysis: The appellant's stand that separate Cenvat accounts were maintained was not examined in detail by the lower authorities. The record also showed the plea that proportionate credit attributable to common inputs had been reversed after clearance of the exempted goods. In such circumstances, the matter required reconsideration of the factual foundation for the demand and of the effect of reversal of credit before final adjudication.

Conclusion: The demand could not be finally sustained on the existing appreciation of facts, and the matter was required to be reconsidered by the original adjudicating authority.

Final Conclusion: The impugned order was set aside and the dispute was sent back for fresh adjudication with all connected issues to be re-examined.

Ratio Decidendi: Where the assessee asserts maintenance of separate accounts and reversal of proportionate common credit, the entitlement to demand under Rule 6(3) must be examined on a proper factual inquiry before final confirmation.

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