2017 (1) TMI 1076 - AT - Central Excise

CENVAT credit - common input services attributable to the exempted goods - whether the reversal of proportionate credit on the input services used in the manufacture of exempted goods would be sufficient compliance as per the retrospective amendment to Rule 6 of CCR, 2004 by Section 73 of the Finance Act? Held that - after the amendment to Section 73 of Finance Act, 2010 by which Rule 6 was amended retrospectively and as per the amended Rule, if an assessee reverses the proportionate credit in respect of input services used in relation to the manufacture of exempted goods, then it would be a full compliance of the said provision - the impugned order is not sustainable in law as the appellant has reversed the CENVAT credit by following the procedure as prescribed in Rule 6 of CCR - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Compliance with retrospective amendment to Rule 6 of CCR, 2004 regarding reversal of proportionate credit on input services used in the manufacture of exempted goods.

Analysis:
The case involved an appeal against an order rejecting the appellant's appeal and upholding the Order-in-Original, which demanded an amount under CENVAT Credit Rules (CCR) 2004. The appellant, engaged in manufacturing electronic equipment, availed exemption benefits for certain goods but did not maintain separate accounts for common input services used in both dutiable and exempted products. The show-cause notice proposed a demand, which the appellant partially reversed after informing the authorities. The Order-in-Original confirmed the demand, leading to the appeal before the Commissioner (A), who upheld the decision. The main issue was whether the reversal of proportionate credit on input services for exempted goods complied with the retrospective amendment to Rule 6 of CCR, 2004 by Section 73 of the Finance Act, 2010.

The appellant argued that the reversal of proportionate credit was sufficient compliance with the retrospective amendment. They explained the method used to calculate the credit attributable to exempted goods based on turnover ratios. The appellant cited various decisions supporting their position. The AR, on the other hand, supported the findings of the impugned order.

After considering the submissions and the retrospective amendment to Rule 6 by the Finance Act, 2010, the Tribunal concluded that the appellant's reversal of proportionate credit for input services used in manufacturing exempted goods constituted full compliance with the provision. The Tribunal referred to previous decisions and held that the reversal of CENVAT credit as per Rule 6 of CCR was sufficient. Consequently, the impugned order was set aside, and the appeal of the appellant was allowed with any necessary consequential relief.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, legal provisions involved, and the Tribunal's decision based on the interpretation of the law and relevant precedents.