2012 (8) TMI 411 - AT - Central Excise

Cenvat credit on input services - manufacture of both taxable and exempted products - non-maintenance of separate accounts - period involved April 2008 to December 2008 - assesee contended application of retrospective amendment in CENVAT Credit Rule (6) done by Section 73 of Finance Act, 2010 to the period involved and reversal of credit attributable to the inputs used in the manufacture of the exempted products as sufficient discharge of their liability - Held that - Matter has to be re-examined by the adjudicating authority in the light of retrospective amendment in Rules along with the application filed by the Appellants under Section 73 of Finance Act, 2010. Appeal allowed by way of remand

Summary

Issues:
1. Compliance with Rule 6 of the CENVAT Credit Rules, 2004 regarding maintenance of separate accounts for exempted and dutiable products.
2. Applicability of retrospective amendment in CENVAT Credit Rule (6) by Section 73 of Finance Act, 2010.
3. Proper reversal of credit for inputs used in the manufacture of exempted products.

Comprehensive Analysis:

Issue 1: Compliance with Rule 6 of the CENVAT Credit Rules, 2004
The dispute in this case revolved around the appellants using inputs for both exempted and dutiable products without following the procedures prescribed in Rule 6 of the CENVAT Credit Rules, 2004. The Revenue proposed a demand of 10% of the value of exempted products as per Rule 6(3) due to the failure to maintain separate accounts for goods used in the manufacture of exempted products.

Issue 2: Applicability of Retrospective Amendment
The counsel for the appellants argued that the retrospective amendment in CENVAT Credit Rule (6) by Section 73 of the Finance Act, 2010 applied to the period in question (April 2008 to December 2008). They contended that the reversal of credit for inputs used in manufacturing exempted products was sufficient to discharge their liability, as per the amended rule. The adjudicating authority had confirmed the demand before the retrospective amendment, citing non-compliance with the rules at that time.

Issue 3: Proper Reversal of Credit
The Revenue did not dispute that if the credit for inputs used in manufacturing exempted products was properly reversed, there would be no further demand. However, they raised concerns about whether the credit reversal was done correctly. The Tribunal found that the matter needed re-examination in light of the retrospective amendment brought by the Finance Act, 2010. Consequently, the appeal was allowed, the impugned order was set aside, and the case was remanded back to the adjudicating authority for fresh consideration in line with the amended rules and the appellants' application under Section 73 of the Finance Act, 2010.

This comprehensive analysis of the judgment highlights the key issues, arguments presented by both sides, and the decision reached by the Appellate Tribunal CESTAT, CHENNAI.