CENVAT credit reversal for common inputs upheld where exempted goods were involved and re-determination was directed.

CENVAT credit on common inputs used in both dutiable and exempted products was considered under the reversal mechanism applicable where separate accounts are not maintained. The Tribunal accepted the assessee's offer to reverse the credit attributable to exempted goods and directed re-determination of the credit taken on common inputs, with verification of supporting evidence and adjustment of any further reversible amount. The HC found these directions consistent with the statutory scheme and held that no error of law was shown in the remand. As the dispute was confined to re-determination in accordance with law, no substantial question of law arose.

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Issues: Whether the Tribunal was justified in setting aside the demand and directing re-determination of CENVAT credit attributable to common inputs used in the manufacture of dutiable and exempted products, in the light of the assessee's offer to reverse the attributable credit under the relevant credit rules.

Analysis: The dispute arose from the use of common inputs in the manufacture of both dutiable and exempted products, where the credit mechanism required either separate maintenance of accounts or compliance with the prescribed reversal/payment options. The Tribunal accepted the assessee's offer to reverse the entire credit attributable to the exempted product and directed the Department to re-determine the credit taken on common inputs, with verification of supporting evidence and adjustment of any further reversible amount. The Court held that these directions were in consonance with the statutory scheme governing common inputs and exempted goods, and that the Tribunal had merely remitted the matter for re-determination in accordance with law.

Conclusion: No error of law was shown in the Tribunal's directions, and no substantial question of law arose for consideration.

Ratio Decidendi: Where the assessee accepts reversal of credit attributable to exempted goods and the Tribunal's directions accord with the statutory reversal mechanism for common inputs, no substantial question of law arises from the remand or re-determination order.

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