Deemed Cenvat credit does not lapse on withdrawal of the scheme absent an express lapse provision.

Deemed Cenvat credit lawfully earned while the notification remained in force did not lapse merely because the facility was later withdrawn, as the withdrawal contained no express provision extinguishing accumulated credit. Credit earned under a subsisting scheme remained available for utilisation, and the fact that exports under bond delayed immediate use did not alter that entitlement. On that basis, utilisation of the accumulated credit after the notification became inoperative was permissible, and the demand, interest and penalty were unsustainable.

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Issues: Whether deemed Cenvat credit validly earned under the notification could be treated as lapsed on withdrawal of the facility and whether the assessee could utilise the accumulated credit after the notification was made inoperative.

Analysis: The credit was earned during the subsistence of the notification and remained unutilised because exports under bond did not immediately require its use. The withdrawal of the deemed credit facility did not contain any provision extinguishing credit already accumulated. Credit lawfully earned is available for utilisation unless the governing scheme expressly provides for lapse, and judicial precedent supports the view that Modvat or Cenvat credit already earned does not lapse merely because the scheme is withdrawn.

Conclusion: The accumulated deemed Cenvat credit did not lapse, and its utilisation after 1-4-2003 was permissible. The demand, interest, and penalty were therefore unsustainable and the appeal succeeded.

Ratio Decidendi: Credit lawfully earned under a subsisting scheme cannot be denied or treated as lapsed on subsequent withdrawal of the scheme unless the statute or notification expressly provides for such lapse.

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