Cenvat credit on stock and work-in-progress need not be reversed when exemption is later opted for.

Opting for exemption under Notification No. 50/2003-C.E. did not require reversal of Cenvat credit already lawfully taken on inputs lying in stock, or contained in semi-finished and finished goods, on the relevant date. The Tribunal noted that the Himachal Pradesh High Court had already decided the issue in favour of the assessee and that a higher judicial forum's declaration of law prevails over a contrary Tribunal view. It also referred to the supporting Larger Bench view that credit validly taken and utilised on dutiable final products need not be reversed merely because the final product later became exempt. The Revenue's appeal was rejected.

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Issues: Whether Cenvat credit taken on inputs lying in stock, and contained in semi-finished and finished goods, was required to be reversed when the assessee opted for exemption under Notification No. 50/2003-C.E. dated 10-6-2003.

Analysis: The dispute concerned the effect of opting for exemption on credit already lawfully availed on inputs and on goods manufactured from such inputs lying in stock on the relevant date. The Tribunal noted that the issue had already been decided by the Himachal Pradesh High Court in favour of the assessee, and that a higher judicial forum's declaration of law must prevail over a contrary Tribunal view. It further noted that the relevant Larger Bench view supported non-reversal of credit already taken and utilised on dutiable final products, even when the final product subsequently became exempt.

Conclusion: The credit was not required to be reversed and could continue in the Cenvat account; the Revenue's appeal was rejected.

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