Valuation of cenvat credit

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Piyush Tewari

Piyush Tewari (Querist)
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29 October 2009 Explain obligation of manufacturer of dutiable and exempted goods/services.

ANIL JANGID

ANIL JANGID (Expert)
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29 October 2009 THE obligation of the manufacturer of dutiable and exempted goods under Rule 6 of the Cenvat Credit Rules has always been a matter of dispute. Where the assessees do not maintain separate accounts for the inputs used in exempted goods and dutiable goods, the demands made at the rate 10% on the value of the exempted goods did not stand the judicial scrutiny in cases where the proportionate credit was reversed instead of paying 10%, following the ratio of Supreme Court ruling in Chandrapur Magnet Wires (P) Ltd (2002-TIOL-41-SC-CX). The latest amendment made to Rule 6 of the Cenvat Credit Rules appears to be aimed at giving effect to the Chandrapur Magnet ratio by providing an option to the manufacturers /service providers to reverse the proportionate credit or to pay 10% or 8% on the value of the exempted goods/services, as the case may be.