Cenvat credit reversal on alleged work in progress was unsustainable where no actual credit use was proved

When an assessee shifted to SSI exemption after earlier availing Cenvat credit, reversal of credit on alleged work-in-progress inputs was not required where the record showed no actual work in progress and no proof that any credit attributable to such inputs had been availed or utilised. The Tribunal treated the Revenue's reliance on the audited balance sheet as insufficient on the facts found, and the High Court found no error in that factual conclusion. On that basis, the demand and penalty were held unsustainable, and the assessee succeeded on the reversal issue.

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Issues: Whether the assessee was required to reverse Cenvat credit on inputs alleged to be involved in work in progress when it shifted to SSI exemption, and whether the Tribunal was justified in holding that no duty demand arose on the facts found.

Analysis: The assessee had opted for SSI exemption after earlier availing Cenvat credit. The Revenue proceeded on the basis that work in progress shown in the audited balance sheet implied availment of credit and that, on opting out of the credit scheme, reversal was mandatory. The Tribunal, however, found as a matter of fact that there was no evidence of actual work in progress, no proof that any credit attributable to such work in progress had been availed or utilised, and therefore no basis to insist on reversal. The High Court found no error in these factual findings or in the Tribunal's conclusion that the demand and penalty were unsustainable.

Conclusion: The issue was decided in favour of the assessee and against the Revenue; no reversal of Cenvat credit was required on the facts found.

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