Cenvat credit on destroyed medicaments remained allowable before the 01.10.2004 circular modified the Board's position.

Cenvat credit on inputs used in destroyed, time-expired medicaments was not recoverable for clearances made before the Board's circular dated 01.10.2004. The earlier circular dated 07.08.2002 stated that disallowance of such credit was not warranted, and that position continued until the later circular modified the instruction. Because the demands related to a period before 01.10.2004, the earlier circular governed the controversy. The Commissioner (Appeals)'s reasoning was not shown to be flawed, so the recovery demand was held unsustainable for the relevant period.

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Issues: Whether Cenvat credit on inputs used in medicaments whose duty had been remitted on account of destruction was recoverable for clearances made before the Board's circular dated 01.10.2004.

Analysis: The remission granted related to time-expired medicaments that had been destroyed and were not marketable. The dispute turned on whether input credit could be denied as a condition for such remission. The Board's earlier circular dated 07.08.2002 stated that disallowance of such credit was not warranted, and that instruction was modified only by the later circular dated 01.10.2004. As the demands related to a period before 01.10.2004, the earlier circular governed the controversy. No ground was shown to disturb the Commissioner (Appeals)'s reasoning.

Conclusion: The demand for recovery of Cenvat credit was not sustainable for the relevant period, and the Department's appeals failed.

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