Unutilised Cenvat credit on work-in-progress cannot sustain duty demand or penalty after SSI exemption is opted for.

Unutilised Cenvat credit allegedly relatable to work-in-progress could not sustain a duty demand when the assessee opted for SSI exemption. The Tribunal found that the record did not establish actual work-in-progress or any subsequent use of the alleged credit, and applied the principle that credit which cannot be utilised and lapses under the Cenvat scheme does not create an enforceable duty liability. On that basis, the demand and the associated penalty were set aside.

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Issues: Whether duty demand and penalty were sustainable on the alleged unreversed Cenvat credit relatable to work-in-progress when the assessee opted for SSI exemption.

Analysis: The appeal turned on whether any enforceable duty liability survived after the assessee opted out of the Cenvat scheme for availing SSI exemption. The Tribunal noted that the material on record did not establish actual work-in-progress and that there was no evidence of subsequent utilisation of the alleged credit. It applied the settled principle that, once credit cannot be utilised and lapses in the circumstances contemplated by the Cenvat scheme, no demand can be raised merely on the basis of the notional credit contained in in-process material. On that basis, the demand and the associated penalty were found unsustainable.

Conclusion: The issue was decided in favour of the assessee; the duty demand and penalty were set aside.

Ratio Decidendi: When an assessee opting for SSI exemption cannot utilise the Cenvat credit and the credit lapses under the scheme, no duty demand can be sustained on the basis of alleged credit attributable to work-in-progress, and penalty does not survive.

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