Cenvat credit on inputs cleared as such is governed by the duty rate on the date of removal, not automatic full reversal.

Rule 3(4) of the Cenvat Credit Rules, 2002 was read to require payment on removal of inputs as such at the duty rate and value applicable on the date of clearance, rather than automatic reversal of the exact Cenvat credit originally taken. The Board clarification was treated as consistent with that plain reading. On that construction, where the duty payable at clearance is lower than the credit earlier availed, the manufacturer is not required to reverse the original credit in full merely for that reason, and the Revenue's higher demand is unsustainable.

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Issues: Whether, on removal of inputs as such after availing Cenvat credit, duty is payable at the rate applicable on the date of clearance under Rule 3(4) of the Cenvat Credit Rules, 2002, or whether the amount originally availed as credit must be reversed in full.

Analysis: Rule 3(4) of the Cenvat Credit Rules, 2002 and the Board's clarification were treated as clear and unambiguous. The applicable requirement was that when goods are removed as such, the manufacturer must pay an amount equal to the duty of excise leviable on such goods at the rate applicable on the date of such removal and on the value determined as applicable. On that construction, there was no basis to insist on reversal of the exact credit originally taken merely because the duty paid on clearance was lower than the earlier credit availed.

Conclusion: The duty paid on removal as such was correctly worked out on the basis of the rate applicable on the date of clearance, and the Revenue's demand was unsustainable. The decision was in favour of the assessee.

Ratio Decidendi: Where inputs are cleared as such after availing Cenvat credit, Rule 3(4) governs the liability by reference to the duty payable on the date of removal, and not by requiring automatic reversal of the exact credit originally taken.

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