Converted advance licence and reversed input credit supported re-credit entitlement under the applicable exemption notification.

A valid conversion of a value based advance licence into a quantity based advance licence can preserve the benefit of the converted licence where the applicable notification does not bar input credit, provided the licence is not transferred. Once the assessee reverses the credit earlier availed on duty-paid inputs, the original objection to exemption is neutralised, and that prior availment does not by itself prevent re-credit of the amount debited in the PLA or RG.23A register. The Revenue's challenge failed because the converted licence and the reversed credit satisfied the notification conditions.

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Issues: Whether, after conversion of a value based advance licence into a quantity based advance licence and reversal/payment of the input credit earlier availed, the assessee was entitled to re-credit of the amount debited in the PLA or RG.23A register.

Analysis: The exports made under the value based advance licence were treated as exports under the converted quantity based advance licence. Under the notification governing quantity based advance licence holders, availment of credit was not barred, the only restriction being absence of transfer of the licence. The earlier reversal of credit removed the objection based on the exemption condition, and the principle recognised in the case law relied upon was that exemption cannot be denied merely because credit had once been taken on duty paid inputs, where such credit stands reversed.

Conclusion: The assessee was entitled to re-credit, and the Revenue's challenge failed.

Ratio Decidendi: Where a licence is validly converted and the notification applicable to the converted licence permits input credit, earlier reversal of credit neutralises the original breach and does not bar re-credit or exemption.

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