Rule 9(2) liability on opting for exemption may apply independently of Cenvat credit balance, pending larger Bench review.

On opting for a value-based exemption, Rule 9(2) was read as requiring the manufacturer to pay an amount equivalent to the Cenvat credit attributable to inputs in stock, work in progress and finished goods on the date of exemption, even where the credit balance was insufficient. The liability was treated as independent of whether the credit had been correctly taken, correctly utilised, or remained available in the account. A contrary Tribunal view and another divergent decision were noted, creating a conflict on the legal questions. The order did not finally decide the merits and directed placement before the President for consideration of reference to a Division Bench.

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Issues: Whether, on opting for a value-based exemption, the manufacturer was required under Rule 9(2) to pay an amount equivalent to the Cenvat credit relatable to inputs in stock, work in progress and finished goods even if the credit balance was insufficient; and whether the liability under Rule 9(2) was independent of recovery provisions under Rule 12.

Analysis: Rule 9(2) was read as requiring payment of an amount equivalent to the credit attributable to inputs in stock, inputs in process and inputs in finished products on the date of opting for exemption, and the requirement was held to be independent of whether the credit had been correctly taken, correctly utilised, or whether a sufficient balance remained in the credit account. The contrary Tribunal view relied upon by the appellant was noted, together with the existence of another decision taking a different interpretation, creating a conflict on the legal questions.

Conclusion: No final ruling on the substantive questions was recorded in this order, and the matter was directed to be placed before the President for consideration of reference to a Division Bench.

Final Conclusion: The order did not finally decide the merits of the dispute under Rule 9(2) and instead sent the controversy for authoritative consideration by a larger Bench.

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