Rule 6 reversal base excludes exclusive dutiable input service credit and the clarificatory amendment applies retrospectively

For reversal under Rule 6(3A) of the Cenvat Credit Rules, only common input service credit relatable to exempted activity is to be considered, and credit used exclusively for dutiable manufacture is excluded from the reversal base. The text also states that the 01.03.2016 substitution of Rule 6(3A) is clarificatory and therefore applies retrospectively. On the stated facts, the appellant's proportionate reversal computation supported by a Chartered Accountant certificate was accepted, and the demand could not be sustained on the computation adopted in the impugned order.

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Issues: Whether, for reversal under Rule 6(3A) of the Cenvat Credit Rules, 2004, the "total Cenvat credit" includes credit on input services used exclusively for dutiable goods, and whether the 01.03.2016 substitution of Rule 6(3A) applies retrospectively as a clarificatory amendment.

Analysis: The dispute concerned the computation base for reversal in a mixed activity situation involving dutiable manufacture and exempted trading activity. The Tribunal held that Rule 6 is concerned with common input services and credit relatable to exempted activity, and does not extend to input services used exclusively in the manufacture of dutiable goods. It further held that the substitution introduced by Notification No. 13/2016-C.E. (N.T.) dated 01.03.2016 is clarificatory in nature and, therefore, operates retrospectively. The appellant had produced a detailed computation and a Chartered Accountant certificate showing proportionate reversal of eligible credit, and there was no finding rejecting that computation on merits.

Conclusion: The demand could not be sustained on the computation adopted in the impugned order, and the appellant's proportionate reversal approach was accepted.

Final Conclusion: The impugned order was set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: For reversal under Rule 6(3A), only common input service credit relatable to exempted output is to be considered, and a clarificatory substitution of the rule operates retrospectively.

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