2011 (6) TMI 494 - AT - Central Excise

Demand - Assessee are not maintaining separate accounts for input, which is commonly used for the manufacture of dutiable as well as exempted final products - Ld., Advocate for the appellants appeared and submitted that in Finance Act, 2010 an amendment has come to Rule 6 of the Cenvat Credit Rules, 2004 and as per that amendment if the assessee has used input, which is commonly used for dutiable as well as exempted final products and the assessee is reversing proportionate Cenvat credit availed on input, which has gone in manufacturing of exempted final products then the assessee is not required to reverse 8% / 10% of the value of the exempted final products - Appeal is allowed by way of remand

Summary

Issues:
Appeal against order of demand for not reversing Cenvat credit on input used for both dutiable and exempted final products.

Analysis:
The appellants filed an appeal challenging the demand order due to not reversing a percentage of the value of exempted goods as they did not maintain separate accounts for inputs used in manufacturing both dutiable and exempted final products. The advocate for the appellants cited an amendment to Rule 6 of the Cenvat Credit Rules, 2004 under the Finance Act, 2010. According to the amendment, if an assessee uses inputs for both dutiable and exempted final products and reverses the proportionate Cenvat credit on inputs used for exempted products, they are not required to reverse a percentage of the value of exempted goods. The amendment was to be applied retrospectively. The appellants had already reversed the Cenvat credit for exempted products and requested the Commissionerate to verify this compliance. The tribunal directed the Commissioner to examine the documents in light of the Finance Act, 2010 amendment and make a decision within one month, allowing the appeal for remand.

This judgment revolves around the interpretation and application of an amendment to the Cenvat Credit Rules, 2004 introduced by the Finance Act, 2010. The key issue is whether the appellants correctly reversed the Cenvat credit of inputs used for manufacturing exempted final products, as required by the amendment. The advocate for the appellants argued that the appellants had complied with the conditions of the amendment by proportionately reversing the Cenvat credit for exempted products and requested the Commissionerate to verify this compliance. The tribunal, considering the submissions, directed the Commissioner to review the documents and issue an appropriate order within a specified timeframe, indicating a procedural resolution to the appeal.

The judgment emphasizes the importance of compliance with tax laws and regulations governing the utilization of Cenvat credit for inputs used in manufacturing both dutiable and exempted final products. The tribunal's decision to remand the case to the Commissioner for further examination underscores the need for thorough verification of compliance with the relevant legal provisions, particularly in cases involving retrospective amendments to tax rules. By allowing the appeal for remand, the tribunal ensures that the correct application of the Finance Act, 2010 amendment is verified and appropriately addressed by the competent authority, highlighting the significance of procedural fairness and adherence to statutory requirements in tax matters.