Cenvat credit reversal on clearance of inputs as such bars further duty demand on transaction value.

Where inputs are cleared as such by a person who is not the manufacturer, the Cenvat Credit Rules, 2004 confine liability to reversal of the credit already taken on those inputs. If that credit has been reversed, no further duty can be demanded on the transaction value. The stated position is that clearance of inputs as such does not create an additional duty liability beyond credit reversal, and any demand and penalty in such circumstances are unsustainable.

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Issues: Whether a respondent clearing inputs as such after reversing the Cenvat credit was liable to pay duty on the transaction value, or only to reverse the credit taken on such inputs.

Analysis: The respondent was not the manufacturer of the inputs and had merely cleared the inputs as such. Under the Cenvat Credit Rules, 2004, the liability in such a situation was confined to reversal of the credit already availed on those inputs. Since the credit had already been reversed, no further duty demand on transaction value could be sustained.

Conclusion: The respondent was not liable to pay duty on the transaction value and had discharged the only liability arising on clearance of inputs as such by reversing the Cenvat credit. The demand and penalty were unsustainable.

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