2011 (1) TMI 987 - AT - Central Excise

Waiver of pre-deposit - Reversal of cenvat credit - not maintaining separate account of inputs / input service which have gone to manufacture of dutiable as well as non-dutiable final products - Held that - Considering amendment inserted through Section 73 of the Finance Act, 2010 the CENVAT Credit Rules, 2004 appellants are required to reverse only the amount of inputs / input service availed by them which has gone in manufacturing of the exempted goods. It would be in the interest of justice to remand the matters back to the original adjudicating authority to requantify the demand accordingly, and to give the benefit of the amendment made in the Finance Act, 2010 to the appellants, Appeals are allowed by way of remand and the stay applications are disposed of in the above manner.

Summary

Issues:
1. Interpretation of Rule 6(3) of CENVAT Credit Rules, 2004 regarding reversal of credit on exempted goods.
2. Application of retrospective amendment through Section 73 of the Finance Act, 2010 to CENVAT Credit Rules, 2004.

Analysis:
1. The judgment revolves around the interpretation of Rule 6(3) of the CENVAT Credit Rules, 2004, which requires the reversal of credit on exempted goods if separate accounts are not maintained for inputs used in both dutiable and non-dutiable products. The appellants were directed to reverse a specific percentage of credit under this rule. However, after considering the arguments and the narrow compass of the issue, the Tribunal allowed the waiver of pre-deposit and proceeded to dispose of the appeals with the consent of both parties.

2. The judgment delves into the retrospective amendment introduced through Section 73 of the Finance Act, 2010, which amended Rule 6 of the CENVAT Credit Rules, 2004. This retrospective amendment impacted the obligations related to the payment of credit attributable to inputs used in manufacturing exempted goods. The Tribunal observed that the appellants are now only required to reverse the credit amount attributable to inputs used in the production of exempted goods. Consequently, the Tribunal remanded the matters back to the original adjudicating authority to recalculate the demand in accordance with the amended provisions. The appellants were granted the benefit of the amendment made in the Finance Act, 2010, and were given an opportunity to present their case before the adjudicating authority.

In conclusion, the judgment provides a detailed analysis of the interpretation of Rule 6(3) of the CENVAT Credit Rules, 2004, and the application of the retrospective amendment through Section 73 of the Finance Act, 2010. It highlights the impact of these rules on the reversal of credit on exempted goods and emphasizes the need for compliance with the amended provisions.