Actual credit reversal for common inputs applied before Rule 6; later 8% reversal could not be applied retrospectively.

For the period before Rule 6 introduced reversal at 8% of the value of exempted goods, an assessee using common inputs for dutiable and exempted goods was required to reverse only the actual credit taken on those inputs. The Board circular governing that period supported reversal only to the extent of credit availed, and the later rule could not be applied retrospectively. As no machinery existed in that earlier period to demand the higher amount, the Revenue's challenge failed and the finding on actual-credit reversal was sustained.

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Issues: Whether, for the period prior to the introduction of Rule 6, the assessee was required only to reverse the actual credit taken on common inputs used in the manufacture of dutiable and exempted goods.

Analysis: The relevant period preceded the introduction of Rule 6 prescribing reversal at 8% of the value of exempted goods. During that period, the Board circular clarified that the assessee was required to reverse only the extent of credit actually taken. The later rule could not be applied to the earlier period, and no machinery for recovery of the higher amount was available for that earlier period.

Conclusion: The finding that only the actual credit taken was required to be reversed for the relevant period was correct, and the Revenue's challenge failed.

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