Cenvat credit cannot be reversed for pre-withdrawal inputs remaining in stock when the exemption changes take effect.

Cenvat credit validly taken on input stock received before withdrawal of the credit facility cannot be reversed merely because the inputs remained unconsumed on the effective date. The Tribunal held that the subsequent notification did not authorise denial of credit already lawfully availed, and the presence of balance stock by itself did not justify demand of reversal, interest or penalty. The view was supported by the cited High Court and Supreme Court authorities, and the Board circular could not override that settled position. The Revenue's demand for reversal of Cenvat credit was therefore unsustainable.

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Issues: Whether Cenvat credit taken on input stock lying with the assessee on the date from which credit on that input was withdrawn could be demanded back along with interest and penalty.

Analysis: The input LDO had been received and credit had been availed before the withdrawal of the facility. The dispute was whether the subsequent notification could compel reversal merely because some quantity of the input remained unconsumed in stock on the effective date. The Tribunal followed the settled position that the notification withdrawing credit did not contemplate denial of credit already validly taken on goods received prior to the change, and that the existence of balance stock did not by itself justify reversal. The view had already been affirmed in the cited High Court decision and by the Supreme Court, and the Board circular could not override that position.

Conclusion: The demand for reversal of Cenvat credit was not sustainable. The appeal of the Revenue failed.

Ratio Decidendi: Credit validly taken on inputs received before the effective date of withdrawal cannot be denied or reversed merely because the inputs remained partly unutilized in stock when the withdrawal became operative.

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