Cenvat credit reversal on inputs cleared as such was held sufficient; additional duty payment demand was rejected.

Where inputs are cleared as such, reversal of the Cenvat credit was treated as sufficient compliance under the governing rule as interpreted by binding precedent. The Revenue's insistence on payment of an amount equal to duty over and above credit reversal was rejected because the Larger Bench view on Rule 3(5) of the Cenvat Credit Rules, 2004 was applied consistently to the earlier period in dispute, and the cited circular did not displace that reasoning. The demand was not sustained, and the impugned order was set aside.

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Issues: Whether reversal of credit availed on inputs is sufficient when the inputs are cleared as such.

Analysis: The dispute turned on the effect of Rule 3(4) of the Cenvat Credit Rules, 2001 and the reliance placed by the Revenue on the requirement to pay an amount equal to duty when goods are removed as such. The decision accepted the assessee's contention that the Larger Bench view on Rule 3(5) of the Cenvat Credit Rules, 2004 applied even to removals made before that rule was introduced, and that the cited circular did not displace that reasoning. On that basis, mere reversal of the credit was treated as sufficient compliance.

Conclusion: The issue was decided in favour of the assessee, and the demand based on payment of duty over and above reversal of credit was not sustained.

Final Conclusion: The appeal succeeded and the impugned order was set aside by applying the Larger Bench ratio.

Ratio Decidendi: Where inputs are cleared as such, reversal of the credit is sufficient if the governing rule as interpreted by binding precedent so permits, and a later amended rule may be applied consistently with that precedent to the earlier period in dispute.

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