SSI exemption and CENVAT credit reversal: validly taken input credit need not be reversed on opting for exemption.

An assessee opting for small scale industry exemption was not required to reverse CENVAT credit already validly taken on inputs in stock, work in progress, or finished goods. The CENVAT Credit regime was read as requiring only determination and debit of credit attributable to inputs where credit remained unutilised, not reversal of credit that had already been earned and lawfully utilised. The absence of a one-to-one correlation between inputs and final products also weighed against insisting on reversal.

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Issues: Whether an assessee opting for small scale industry exemption is required to reverse the CENVAT credit already taken on inputs lying in stock, work in progress, or finished goods.

Analysis: The issue was covered by the earlier binding view that SSI exemption operates through the exemption notification and not so as to compel reversal of credit already validly taken. Rule 9(2) of the CENVAT Credit regime was understood as requiring determination of credit attributable to inputs in stock and debit of credit, if any, lying unutilised, but not as authorising recall of credit already earned and rightly utilised. The absence of a one-to-one correlation between inputs and final products was also treated as a relevant factor against insisting on reversal.

Conclusion: The assessee was not required to reverse the CENVAT credit on opting for SSI exemption, and the Revenue's appeal failed.

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