Cenvat credit already validly utilised need not be reversed merely because final products later became exempt.

Cenvat credit lawfully taken and utilised when final products were dutiable is not required to be reversed merely because the products later become exempt under a notification. The governing principle applied is that validly earned credit remains usable against duty on dutiable clearances, and a subsequent change in exemption status does not, by itself, create a reversal liability. Rule 9(2) was treated as inapplicable on the facts, and the cited recovery provisions did not justify denial of credit. The assessee's refund claim was accordingly allowed in accordance with law.

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Issues: Whether Cenvat credit validly taken and utilised when the final products were dutiable was required to be reversed, and whether refund could be denied when the products later became exempt under the exemption notification.

Analysis: The exemption notification was already in force, but the credit had been taken and utilised at a time when the final products were dutiable. The governing principle applied was that where credit is lawfully taken on inputs and lawfully utilised against duty on dutiable clearances, the subsequent exemption of the final product does not by itself create a liability to reverse the credit. The Tribunal followed the settled view that the right to utilise validly earned credit is indefeasible, and that neither the change in duty status of the final product nor the cited recovery provisions justified reversal in such circumstances. The objection based on Rule 9(2) was held inapplicable on the facts, and the assessee's refund claim was allowed in accordance with law.

Conclusion: The credit did not require reversal, and the assessee was entitled to relief.

Ratio Decidendi: Cenvat credit validly taken and utilised while the final product was dutiable cannot be reversed merely because the final product later becomes exempt.

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