CENVAT credit reversal on inputs cleared as such suffices; no further duty and extended limitation unavailable without suppression.

When inputs on which CENVAT credit has been taken are removed as such, payment equal to the credit availed satisfies the excise obligation under Rule 3(5) of the CENVAT Credit Rules, 2004, and no further duty at the inputs' rate is payable. A demand raised years after the removals was also held time-barred because the assessee had filed regular returns and the department was aware of the clearances and reversals, leaving no basis for the extended limitation period in the absence of suppression or wilful misstatement.

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Issues: (i) Whether inputs removed as such after reversal of the exact CENVAT credit availed thereon attracted further duty at the rate applicable to the inputs, or whether payment equal to the credit taken was sufficient. (ii) Whether the demand was barred by limitation.

Issue (i): Whether inputs removed as such after reversal of the exact CENVAT credit availed thereon attracted further duty at the rate applicable to the inputs, or whether payment equal to the credit taken was sufficient.

Analysis: The inputs had already suffered duty at the time of receipt and the assessee reversed an amount equal to the credit actually availed when the inputs were cleared as such. The applicable scheme under Rule 3(5) of the CENVAT Credit Rules, 2004 and the departmental circular clarified that, where inputs on which credit had been taken are removed as such, the manufacturer is required to pay an amount equal to the credit availed. The reasoning also followed the settled principle that the Central Excise law does not contemplate reassessment of goods that have already been cleared on payment of duty.

Conclusion: Payment by reversal of the exact credit availed was sufficient and no additional duty was payable. This issue was decided in favour of the assessee.

Issue (ii): Whether the demand was barred by limitation.

Analysis: The demand related to removals made during 2001 to 2003, while the notice was issued in 2006. The assessee had been filing regular returns and the department was already aware of the clearances and the reversal made on such clearances. On those facts, there was no suppression or wilful misstatement to justify the extended period.

Conclusion: The demand was time-barred. This issue was decided in favour of the assessee.

Final Conclusion: The Revenue's challenge failed, and the order setting aside the duty demand, interest, and penalties was sustained.

Ratio Decidendi: When inputs on which CENVAT credit has been taken are removed as such, the assessee satisfies the excise obligation by paying an amount equal to the credit availed, and no further duty can be demanded merely because the inputs were originally duty-paid.

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