Cenvat credit lawfully taken and used cannot be recovered after exemption is chosen; Rule 9(2) does not permit recall.

Cenvat credit validly taken and utilised while final products were dutiable cannot be recovered merely because the assessee later opted for exemption. Rule 9(2) requires only debit of any remaining credit balance and lapse of the unutilised balance; it does not authorise recall of credit already lawfully used. The record showed no wrongful availment or wrongful utilisation, so the recovery provisions under Rule 12 were not attracted. On that basis, the demand for the differential amount was held not permissible and the Revenue's appeal failed.

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Issues: Whether Cenvat credit correctly taken and utilised could be recovered when the assessee later opted for exemption and Rule 9(2) was invoked.

Analysis: The demand was founded on Rule 9(2) of the Cenvat Credit Rules, but the record showed that the credit had been taken and utilised correctly while the assessee was paying duty on final products. Recovery under Rule 12 was not attracted because there was no wrongful taking or wrongful utilisation of credit. The Court applied the principle that Cenvat credit, once validly earned and utilised, is indefeasible and cannot be called back. It further held that Rule 9(2) only requires debit of the credit balance, if any, and lapse of any remaining balance, and does not authorise recall of credit already lawfully utilised.

Conclusion: Recovery of the differential amount was not permissible, and the appeal by Revenue failed.

Ratio Decidendi: Cenvat credit correctly taken and correctly utilised cannot be demanded back on the assessee's subsequent switch to exemption, and Rule 9(2) cannot be construed to authorise such recovery absent wrongful availment or utilisation.

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