Cenvat credit reversal on later exemption is not required where credit was validly taken and utilised on dutiable goods.

Cenvat credit lawfully availed and utilised when final products were dutiable is not required to be reversed merely because those products later become exempt. The stated principle extends to credit relatable to inputs in stock, inputs contained in finished goods, and work in process, unless the governing rule expressly mandates reversal. A later exemption does not by itself create recoverability of credit already validly taken, and a demand raised solely on that basis cannot be sustained. The text also notes that the effect of a newly inserted sub-rule under the Cenvat Credit Rules, 2004 was not examined because that issue lay outside the reference.

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Issues: Whether Cenvat credit validly taken and utilised on dutiable final products is required to be reversed or recovered when the final products subsequently become exempt, including in respect of inputs in stock, inputs contained in finished goods, and work in process.

Analysis: The Tribunal followed the Larger Bench ruling that credit lawfully taken and utilised when the final product was dutiable does not become recoverable merely because the final product later becomes exempt. The Tribunal noted that the Larger Bench had considered the competing view and had expressly held that there is no requirement to reverse such credit on subsequent exemption. The reference to the newly inserted sub-rule under the Cenvat Credit Rules, 2004 was not examined because that question was outside the reference.

Conclusion: Reversal of the Cenvat credit was not required, and the demand confirmed on that basis could not be sustained.

Ratio Decidendi: Credit lawfully availed and utilised while the final product is dutiable cannot be reversed or recovered merely because the final product becomes exempt thereafter, unless the governing rule expressly so provides.

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