CENVAT credit reversal was required where concessional exemption conditions barred credit on inputs used for clearances.

Opting for clearance under S. No. 182 of Notification No. 6/03-C.E. with Condition No. 44 required compliance with the condition that no CENVAT credit on inputs be taken and duty be paid in cash or through account-current. Where the assessee had initially chosen that concessional entry and only later shifted to the nil-rate option, clearances for the relevant period remained under S. No. 182. As the inputs in stock on 1-3-03 were used to manufacture goods cleared under that entry, the credit relatable to those inputs had to be reversed to satisfy the exemption condition.

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Issues: Whether the appellant, having opted to clear goods under S. No. 182 of Notification No. 6/03-C.E. at a concessional rate subject to Condition No. 44, was required to reverse the MODVAT/CENVAT credit attributable to inputs lying in stock as on 1-3-03 and used in the manufacture of the final product.

Analysis: The appellant had initially opted for S. No. 182 by letter dated 3-3-03 and changed the option only on 30-4-03. For the relevant period, clearances were therefore made under S. No. 182, not under the nil-rate entry. Condition No. 44 attached to S. No. 182 required that no credit of duty paid on inputs under the CENVAT Credit Rules, 2002 be taken and that duty be paid in cash or through account-current. Since the inputs in stock as on 1-3-03 were used in the manufacture of goods cleared under S. No. 182, the credit relatable to such inputs had to be reversed to satisfy the condition attached to the exemption.

Conclusion: The appellant was required to reverse the credit of Rs. 1,71,021/- attributable to the inputs lying in stock, and the Revenue's stand was upheld.

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