Cenvat credit entitlement on inputs removed as such cannot be curtailed by Rule 3(6) or recipient-side reassessment.

When inputs are removed as such under the Cenvat scheme, the amount paid by the manufacturer under Rule 3(4) is treated as creditable under Rule 3(5) as if it were duty paid, and the recipient may take full credit of that amount. Rule 3(6) was held to regulate only the duties specified in Rule 3(1) and not to curtail credit of amounts paid under Rule 3(4). Reassessment of the input value at the recipient's end was also held impermissible. The proposed restriction, together with the related demand, interest and penalty, was therefore unsustainable.

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Issues: Whether the appellant was entitled to take Cenvat credit of the entire amount paid at the time of clearance of inputs as such under Rule 3(4) of the Cenvat Credit Rules, 2002, and whether the credit was restricted by Rule 3(6) of the said Rules.

Analysis: Rule 3(4) required the manufacturer removing inputs as such to pay an amount equal to the credit availed, and Rule 3(5) treated that amount as Cenvat credit as if it were duty paid by the person removing the goods. The amount paid by the supplier was covered by an invoice under Rule 7, and Rule 3(5) did not prescribe any formula limiting the quantum of credit available to the recipient. Rule 3(6) only regulated the duties specified in Rule 3(1) and did not curtail credit of the amount paid under Rule 3(4). The attempt to re-assess the input at the recipient's end was also held impermissible.

Conclusion: The appellant was entitled to credit of the entire amount paid under Rule 3(4), and the restriction proposed by the department was not sustainable.

Final Conclusion: The impugned demand, interest, and penalty could not be sustained, and the appellant succeeded on the principal issue.

Ratio Decidendi: Where inputs are removed as such and the amount payable under Rule 3(4) is paid and invoiced under the Cenvat scheme, the recipient is entitled under Rule 3(5) to avail the full amount as credit, and that entitlement is not curtailed by Rule 3(6) or by reassessment at the recipient's end.

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