Rule 6 reversal compliance defeats further excise demand absent Section 11D invocation and proper duty recovery allegations.

Compliance with the reversal requirement under Rule 6 of the Cenvat Credit Rules, 2002 was treated as sufficient where the assessee had already reversed 8.64% of the sale price, exceeding the prescribed 8% benchmark. The proposed demand was described as unsustainable because it was computed on a gross figure without credit for the amount already reversed, indicating defective computation and non-application of mind. Mere recovery of the reversed amount from customers was said not to create additional liability in the absence of invocation of Section 11D of the Central Excise Act, 1944 or any allegation that the amount was collected as duty.

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Issues: Whether the demand of the entire amount was sustainable when the assessee had already reversed more than the prescribed 8% under Rule 6 of the Cenvat Credit Rules, 2002, and whether recovery of that amount from customers justified the demand in the absence of invocation of Section 11D of the Central Excise Act, 1944.

Analysis: The assessee had reversed 8.64% of the sale price, which exceeded the 8% reversal contemplated by Rule 6 of the Cenvat Credit Rules, 2002. The notice quantified the demand on the gross figure without giving credit for the amount already reversed, even though the records showed that only a small differential could arise if the Board's circular was assumed to apply. The demand was therefore based on a defective computation and reflected non-application of mind. Mere collection of the reversed amount from customers did not, by itself, justify the demand when the statutory requirement of reversal had been complied with. The notice also did not invoke Section 11D of the Central Excise Act, 1944 or allege that the amount was recovered as representing duty.

Conclusion: The demand was unsustainable and the appeal was allowed.

Final Conclusion: Compliance with the reversal obligation under Rule 6 negatived the proposed demand, and collection of the amount from buyers did not enlarge the liability in the absence of a separate statutory basis.

Ratio Decidendi: Once the assessee has complied with the prescribed reversal under Rule 6 of the Cenvat Credit Rules, 2002, no further demand can be sustained merely because the amount was recovered from customers, unless a distinct statutory provision is invoked and established.

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