Cenvat credit on duty-paid inputs remains valid despite later exemption of final products; reversal not required absent a specific rule.

Cenvat credit validly taken on duty-paid inputs used in the manufacture of dutiable final products cannot be reversed merely because the finished goods are later cleared without duty after the product becomes exempt. The HC applied the principle that the credit scheme does not require one-to-one correlation between inputs and final products, and in the absence of a specific rule mandating reversal, credit lawfully earned and utilised when the goods were dutiable remains intact. The revenue appeal was dismissed.

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Issues: Whether Cenvat credit validly availed on inputs used in the manufacture of dutiable final products is liable to be reversed merely because the finished goods were cleared without duty after the final product later became exempted.

Analysis: The credit was taken on duty-paid inputs when the goods manufactured by the assessee were dutiable. The legal position applied by the Court was that the credit scheme does not require one-to-one correlation between the inputs and the final product, and there is no provision for reversal of credit lawfully taken merely because the final product subsequently becomes exempt. The rule against credit for exempted goods did not justify reversal of credit already validly earned and utilised when the goods were dutiable.

Conclusion: The credit was not reversible, and the issue was answered in favour of the assessee.

Final Conclusion: The revenue appeal was found to disclose no substantial question of law and was dismissed, leaving the Tribunal's order undisturbed.

Ratio Decidendi: Credit lawfully taken on duty-paid inputs while the final product is dutiable cannot be reversed merely because the final product becomes exempted later, in the absence of a specific rule mandating such reversal.

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