CENVAT credit need not be reversed on conversion from DTA to 100% EOU absent express statutory mandate.

Validly taken CENVAT credit could not be reversed merely because a DTA unit was converted into a 100% EOU, absent an express statutory rule requiring reversal. The Tribunal held that the governing framework did not bar a 100% EOU from carrying forward valid credit, and the cited Board circular was inapplicable in the changed legal position. On that basis, the demand for reversal and the penalty were unsustainable.

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Issues: Whether CENVAT credit lying in the books of a DTA unit on its conversion into a 100% EOU was required to be reversed and whether demand and penalty could be sustained.

Analysis: The Tribunal followed its earlier view that, on the relevant statutory framework, there was no provision barring a 100% EOU from availing or carrying forward validly taken credit, and no rule requiring reversal merely because the unit changed status from DTA to EOU. The cited Board circular was held to be inapplicable in the changed legal position, and the reasoning that valid credit does not become reversible absent an express statutory mandate was accepted.

Conclusion: The demand for reversal of CENVAT credit and the penalty were unsustainable.

Ratio Decidendi: Validly taken CENVAT credit cannot be directed to be reversed merely because a DTA unit is converted into a 100% EOU, unless the governing rules expressly provide for such reversal.

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