Cenvat credit on reusable plastic crates: demand was treated as unsustainable where credit was limited and later reversed.

Reversal of Cenvat credit on reusable plastic crates used for transporting aerated water was examined against the assessee's claim that most crates were already in stock, only a small quantity had been wrongly availed as credit, and that such credit had later been reversed on evidence. The analysis notes that the demand was computed on a much larger crate figure than the quantity on which credit had actually been taken, and that reusable crates did not require the same repeated account-keeping as virgin inputs once initial consumption was accounted for. Limitation was also considered to support the assessee's case, and the demand and penalties were treated as unsustainable.

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Issues: Whether reversal of Cenvat credit could be demanded in respect of reusable plastic crates used for transport of aerated water, and whether the demand was sustainable when the assessee asserted prior availability of crates, later reversal of wrongly availed credit, and limitation.

Analysis: The assessee had substantial crate stock already available and had availed credit only in respect of a small number of crates, which was later reversed on evidence. The demand, however, proceeded on a much larger figure of crates, although the crates were reusable and no credit had been taken on the entire quantity treated as the basis of demand. The reasoning also accepted that once initial consumption is accounted for, repeated use of such inputs does not call for separate account-keeping in the manner suggested for virgin inputs. The plea of limitation also carried force in the facts.

Conclusion: The demand and penalties were held unsustainable and the assessee's appeal was allowed.

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