Proportionate reversal of credit

[Dalia Felix]

Dear Sirs,

My doubt is regarding the proportionate reversal of cenvat credit as per sub-rule 3(A) of Rule 6, CENVAT Credit Rules, 2004. 

How can we calculate the amount to be reversed corresponding to the inputs used in the manufacture of exempted goods in the following case? Say, two products X and Y are simultaneously produced from inputs A and B ( X is the more valuable good). Suppose 1000 Tons each of A & B are used for producing 20 Tons of X, an exempted good and 50 Tons of Y, a dutiable product.How can we calculate the proportionate credit to be reversed by the manufacturer?  

Whether the manufacturer has to consider the quantity or value of X and Y produced? Is he free to choose either basis (whichever is more advantageous)?

AI Summary

CENVAT Credit Reversal Under Rule 6(3A): Use Value, Not Quantity, for Exempted Goods Production. A participant in a discussion forum inquired about the proportionate reversal of CENVAT credit under Rule 6, Sub-rule 3(A) of the CENVAT Credit Rules, 2004, specifically regarding inputs used to manufacture exempted goods. The query involved whether the reversal should be based on the quantity or value of products produced. Responses varied, with some suggesting using the formula prescribed in the rules, while others debated between quantity and value-based methods. Ultimately, it was noted that the rules prescribe using the value of final products for determining the credit reversal, not quantity, even if it seems more beneficial.