Excess Cenvat credit reversal cannot sustain a duty demand when more duty was already paid than required.

Excess reversal of Cenvat credit on clearance of inputs as such does not justify a fresh duty demand where the assessee has already reversed more credit than the amount legally required. The relevant rule requires reversal only to the extent of duty attributable to the removed inputs, and a demand cannot be sustained when the net effect is payment of more duty than due. Because the duty demand failed, the consequential interest demand also fell away. The demand was therefore set aside with consequential relief.

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Issues: Whether the demand of duty and interest could be sustained when the assessee had reversed Cenvat credit in excess of the amount legally required on clearance of inputs as such.

Analysis: The relevant rule required reversal of credit equal to the duty attributable to the inputs removed as such. The assessee had reversed more credit than necessary, and the net effect was payment of more duty than was due. The conclusion that the excess reversal represented wrongful utilisation was not accepted, because the demand was sought to be fastened notwithstanding that the assessee had already discharged more duty than required. The interest demand was consequential to the duty demand.

Conclusion: The demand could not be sustained and was set aside, with consequential relief.

Ratio Decidendi: Where an assessee has reversed Cenvat credit in excess of the amount legally payable, a demand cannot be sustained merely on the basis of such excess reversal when the net effect is payment of more duty than required.

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