Proportionate CENVAT credit reversal for exempted clearances can satisfy Rule 6, subject to proper factual verification.

Proportionate reversal of CENVAT credit attributable to exempted goods and exempted services was treated as sufficient compliance with Rule 6 of the CENVAT Credit Rules, 2004. The Tribunal noted that the adjudicating authority had proceeded on the mistaken assumption that a specific election under Rule 6(3A) was mandatory, without properly testing the factual correctness of the assessee's reversal claim. Because the original record had not been adequately scrutinised, the Tribunal set aside the impugned order and remanded the matter to the original authority for fresh decision in light of the appellant's submissions and the settled law.

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Issues: Whether reversal of CENVAT credit proportionate to the value of exempted goods and exempted services constitutes sufficient compliance with Rule 6 of the CENVAT Credit Rules, 2004, and whether the demand, interest and penalty confirmed without proper scrutiny of the facts could be sustained.

Analysis: The order-in-original proceeded on the footing that, unless the assessee specifically adopted the option under Rule 6(3A), reversal under Rule 6(3) was mandatory. The Tribunal noted that it is settled law that proportionate reversal attributable to exempted clearances and exempted services suffices under the CENVAT Credit Rules, 2004. It also found that the adjudicating authority had not properly examined the factual veracity of the noticee's submissions, and that the Tribunal could not itself verify the appropriateness of the reversal in the absence of such scrutiny at the original stage.

Conclusion: The impugned order was set aside and the matter was remanded to the original authority for fresh decision in accordance with the appellant's submissions and the settled law.

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