Modvat credit reversal under Rule 57CC can count as non-availment for small-scale exemption eligibility.

Reversal of Modvat credit by debiting 8% of the value of exempted clearances under Rule 57CC was treated as equivalent to non-availment of credit for exemption eligibility. Applying Chandrapur Magnet Wires and Life Long Appliances, the Tribunal distinguished the Larger Bench view relied on by the Revenue and held that the assessee satisfied the condition in the relevant small-scale exemption notification for goods cleared under its own brand name. The exemption was therefore available, and the Revenue's objection failed.

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Issues: Whether the benefit of small scale exemption was available when the assessee had taken modvat credit on inputs but had reversed the credit by debiting 8% of the value of exempted clearances under Rule 57CC.

Analysis: The Tribunal held that the earlier Larger Bench view relied upon by the Revenue was distinguishable on facts. Following the Supreme Court decision in Chandrapur Magnet Wires and the Tribunal's later decision in Life Long Appliances, it held that payment of 8% of the value of exempted goods under Rule 57CC has the effect of treating the credit as not availed. On that basis, the assessee satisfied the condition for the exemption notification governing the goods cleared under its own brand name.

Conclusion: The exemption was available to the assessee and the Revenue's objection failed.

Ratio Decidendi: Where credit taken on inputs is subsequently reversed in the manner contemplated by Rule 57CC, the reversal is treated as equivalent to non-availment of credit for the purpose of exemption eligibility.

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