Cenvat credit on inputs removed as such must be reversed only; no fresh excise duty or reassessment applies.

Removal of inputs as such after availing Cenvat credit requires only reversal of the credit taken, not a fresh assessment or second levy of excise duty. The applicable Cenvat rule was treated as continuing the Modvat scheme, under which the object is to neutralise credit and not to tax goods again after duty has already been discharged on their original clearance. Because the inputs had already suffered duty at the stage of their first removal, central excise law did not permit reassessment merely due to later removal by the credit-taking assessee. Once the credit was restored, no further duty was payable.

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Issues: Whether, on removal of inputs as such after availing Cenvat credit, the manufacturer was required to make a fresh duty assessment and pay duty on the goods or was only required to reverse the credit taken.

Analysis: The relevant rule under the Cenvat Credit Rules required payment of an amount equal to the duty leviable on the goods at the time of removal, and it was treated as the successor to the earlier Modvat provision. The scheme was held to be one of granting relief by neutralising the credit taken on inputs, not of imposing a second levy on goods that had already suffered duty at the stage of their original clearance. The Court reasoned that duty liability on the inputs had already been determined and discharged by the original manufacturer, and there was no provision in central excise law for reassessment of such goods merely because they were later removed as such by the credit-taking assessee. Since the appellants had already restored the credit taken, nothing further was payable.

Conclusion: The assessee was not liable for any fresh assessment or additional duty on removal of the inputs as such and was required only to reverse the credit; the demand contrary to this position was unsustainable.

Ratio Decidendi: Where inputs on which credit has been taken are removed as such, the statutory obligation is confined to neutralising the credit availed and does not extend to a fresh assessment or second levy of excise duty on goods already duty-paid at the time of their original removal.

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