Cenvat credit reversal under Rule 6 does not apply to sulphuric acid cleared for specified end use under CT-3 bond.

Sulphuric acid cleared to fertilizer manufacturers under Notification No. 4/2006-C.E. against CT-3 certificate/bond was treated as dutiable goods removed under a Chapter X-type procedure, not as exempted goods or goods chargeable to nil rate of duty. On that basis, Rule 6 of the Cenvat Credit Rules, 2004, which applies where a manufacturer is dealing in both dutiable and exempted or nil-rated final products, did not apply. As the manufacturer produced only sulphuric acid, the precondition for reversal was absent and no 10% reversal of the value of clearances was required.

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Issues: Whether Rule 6 of the Cenvat Credit Rules, 2004 required reversal of 10% of value in respect of sulphuric acid cleared under CT-3 certificate/bond to fertilizer manufacturers, and whether such clearances could be treated as exempted goods or goods chargeable to nil rate of duty.

Analysis: The clearance of sulphuric acid under Notification No. 4/2006-C.E. against CT-3 certificate was not a clearance of exempted goods. The goods remained dutiable; the procedure merely permitted removal without upfront payment of duty for specified end use. The reasoning adopted in prior decisions was that goods cleared under Chapter X-type procedures are neither exempted goods nor goods chargeable to nil duty, and the scheme of Rule 6 applies only where a manufacturer is engaged in both dutiable and exempted/nil-rated final products. Since the appellant manufactured only sulphuric acid, which was otherwise dutiable, the precondition for applying Rule 6 was absent.

Conclusion: Rule 6 of the Cenvat Credit Rules, 2004 was not applicable, and the appellant was not required to reverse 10% of the value of the clearances.

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