CENVAT re-credit on duty-paid inputs required reconsideration after ignoring the applicable larger bench ruling and factual findings.

Re-credit of CENVAT credit on inputs cleared on payment of duty was held to require fresh examination because the Revenue's circular on unused or written-off inputs did not apply to goods cleared on assessable value under Section 4 of the Central Excise Act. The lower appellate authority also failed to consider the larger bench ruling cited by the Revenue on suo motu re-credit and overlooked an unchallenged finding of the original authority. The impugned order was set aside and the matter was remanded for reconsideration in accordance with law and natural justice.

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Issues: Whether re-credit taken in respect of inputs cleared on payment of duty under Rule 3(4) of the CENVAT Credit Rules, 2001/2002 was admissible, and whether the matter required re-examination.

Analysis: The Board circular relied on by the Revenue concerned unused inputs written off or partially written off in accounts and was not applicable to inputs that had been cleared on payment of appropriate duty on an assessable value determined under Section 4 of the Central Excise Act. At the same time, the lower appellate authority had not considered the effect of the larger bench decision cited by the Revenue on the question of suo motu re-credit, and an unchallenged finding of the original authority had also been overlooked. In these circumstances, the controversy required reconsideration in accordance with law and the principles of natural justice.

Conclusion: The impugned order was set aside and the matter was remanded for fresh examination.

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