Mandatory reversal of Cenvat credit on opting for exemption limits pre-deposit waiver and supports only conditional interim relief.

Opting for value-based exemption did not relieve the assessee of the obligation to reverse Cenvat credit attributable to inputs in stock, work-in-process, and finished goods. Rule 9(2) of the Cenvat Credit Rules, 2002 was treated as mandatory, and reliance on Rule 3(2) or the exemption notification illustration was found insufficient to displace that requirement. The balance sheet was treated as relevant to liability, and the materials on record showed a prima facie case against complete waiver. Only conditional interim relief was therefore considered appropriate, with partial deposit directed pending appeal.

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Issues: Whether the appellant was entitled to total waiver of pre-deposit and interim stay in a dispute concerning reversal of Cenvat credit on opting for exemption under the relevant notification.

Analysis: The appellant had opted for value-based exemption, but the credit relatable to inputs lying in stock, in process, and in finished goods was not reversed. The requirement under Rule 9(2) of the Cenvat Credit Rules, 2002 was treated as mandatory, and the contention based on Rule 3(2) was held not to override that obligation. The reliance placed on the exemption notification illustration was also found insufficient to limit the operation of Rule 9(2). The balance sheet was treated as a relevant document bearing on liability. On these facts, a complete waiver was not warranted.

Conclusion: Total waiver of pre-deposit was refused, and only conditional interim relief was granted by directing deposit of 50% of the duty amount within the stipulated time.

Final Conclusion: The appellant obtained only partial protection pending appeal, with the disputed demand kept in abeyance subject to compliance with the ordered deposit.

Ratio Decidendi: The mandatory reversal requirement on opting for exemption prevails over the assessee's contrary reliance on the general credit-taking provision, and complete waiver of pre-deposit is not justified where a prima facie liability is shown.

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