Cenvat credit reversal for exempt by-products fails where no input credit was taken and any wrong credit was promptly reversed.

Rule 6(3)(b) of the Cenvat Credit Rules could not be invoked to demand reversal of 10% of the sale price where no Cenvat credit had been taken on the inputs used for exempt by-products and any wrongly availed credit was reversed in the same month. The factual findings recorded by the adjudicating authority, Commissioner (Appeals) and Tribunal were supported by the record and were not shown to be perverse. On that basis, the precondition for the demand was not established, the assessee was held not liable to reverse the amount, and the revenue's challenge failed.

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Issues: Whether the assessee was required to reverse 10% of the sale price under Rule 6(3)(b) of the Cenvat Credit Rules in respect of exempt by-products when no Cenvat credit had been taken on the relevant inputs, and any credit wrongly taken was reversed in the same month.

Analysis: The factual findings of the adjudicating authority, the Commissioner (Appeals), and the Tribunal were that no Cenvat credit had been availed on the inputs used for the manufacture of the exempt by-products, and the only credit mistakenly taken was reversed promptly. Those findings were supported by the record and were not shown to be perverse or erroneous. On that basis, the precondition for demanding reversal of an amount equal to 10% of the sale price was not established.

Conclusion: The assessee was not liable to reverse the amount claimed under Rule 6(3)(b), and the finding in its favour was upheld.

Final Conclusion: No substantial question of law arose for interference, and the revenue's challenge failed.

Ratio Decidendi: Where exempt goods are generated without availing Cenvat credit on the relevant inputs, and any wrongly availed credit is reversed, Rule 6(3)(b) cannot be invoked to require payment of 10% of the sale price.

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