Cenvat credit reversal on removal of inputs as such is limited to credit taken, not fresh duty or cess levy.

On removal of imported inputs as such, the reversal obligation was confined to the credit actually availed on receipt of those inputs. The tribunal rejected the attempt to distinguish the governing rule from the earlier Larger Bench view and held that the liability did not extend to a fresh notional levy of additional duty or cess as if the inputs had been manufactured in the factory. The demand for additional duty and cess was therefore not sustainable, and the appeal was allowed.

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Issues: Whether, on removal of imported inputs as such, the assessee was required to reverse only the credit actually taken at the time of receipt of the inputs, or to discharge additional duty and cess as if the inputs had been manufactured in the factory.

Analysis: The liability on clearance of inputs as such was held to be co-extensive with the credit originally availed on receipt of those inputs. The difference sought to be drawn between the relevant rule applicable to the present case and the rule considered in the earlier Larger Bench decision was rejected. The reasoning followed the view that reversal is linked to the credit taken and not to a fresh notional levy of additional duties or cess on the removed inputs.

Conclusion: The demand for additional duty and cess was not sustainable. The appeal was allowed.

Ratio Decidendi: On removal of inputs as such, the reversal obligation is confined to the credit taken on those inputs, unless the governing rule expressly mandates a wider levy.

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