Full Credit Allowed

In a significant reaffirmation of settled principles under Rule 6 of the CENVAT Credit Rules, the Tribunal has clarified that specified input services falling within the ambit of Rule 6(5) are entitled to full credit protection, even where such services are commonly used in the manufacture of both exempt and dutiable goods.

The attempt of the department to invoke Rule 6(3) and impose a demand equivalent to 10% of the value of exempt goods was rejected on the fundamental ground that Rule 6(5), being couched in a non-obstante clause, overrides the restrictions contained in Rule 6(3).

Further, the Tribunal underscored the importance of giving meaningful effect to the retrospective amendment introduced under the Finance Act, 2010, holding that procedural lapses cannot defeat substantive entitlement, particularly in the context of proportionate reversal mechanisms.