Reversal of proportionate Cenvat credit and retrospective amendment led to remand of duty demand on exempted by-products.

Demand of duty on exempted by-products under Rule 6(b) of the Cenvat Credit Rules was challenged on the basis that common inputs were used for both dutiable and exempted goods, but proportionate Modvat/Cenvat credit attributable to the exempted products had already been reversed. Reliance was also placed on the retrospective amendment introduced by Section 72 of the Finance Act, 2010. The impugned demand was therefore not finally sustained at that stage, the order was set aside, and the matter was remanded to the Commissioner for fresh consideration in light of the reversal of credit and the retrospective amendment.

---

---

Issues: Whether the demand of duty confirmed on exempted by-products under Rule 6(b) of the Cenvat Credit Rules could be sustained when the appellants had reversed the proportionate credit attributable to the exempted products and sought relief on the basis of the retrospective amendment.

Analysis: The appeal was supported by the contention that common inputs were used in the manufacture of dutiable and exempted products, but the proportionate Modvat/Cenvat credit relatable to the exempted products had already been reversed. The matter was also stated to be covered by the retrospective amendment introduced by Section 72 of the Finance Act, 2010. In that view, the impugned demand required reconsideration by the adjudicating authority.

Conclusion: The demand was not finally sustained at this stage, the impugned order was set aside, and the matter was remanded to the Commissioner for fresh consideration.

---