Cenvat credit reversal requires a specific rule basis; plant closure alone does not justify reversal or equal penalty.

Cenvat credit is reversible only where the rules specifically require reversal, such as clearance of inputs as such or, after the 2009 amendment, write-off of inputs as obsolete or unfit for use. Mere closure of the plant or continued stocking of inputs after dismantling does not, by itself, trigger reversal, and Rule 14 does not apply where credit was correctly taken and there is no wrongful availment or erroneous refund. Equal penalty is also not justified in the absence of clandestine removal or other material showing culpable conduct.

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Issues: (i) whether penalty equal to the confirmed duty was sustainable, and (ii) whether Cenvat credit was reversible merely because the inputs remained in stock after closure and dismantling of the plant.

Issue (i): whether penalty equal to the confirmed duty was sustainable.

Analysis: The inputs were found during dismantling of the plant, there was no allegation or material of clandestine removal, and the duty demand on the cleared quantity was not disputed on merits. In these circumstances, the case did not warrant equal penalty.

Conclusion: The penalty was not sustainable and was set aside in favour of the assessee.

Issue (ii): whether Cenvat credit was reversible merely because the inputs remained in stock after closure and dismantling of the plant.

Analysis: Reversal of credit is confined to situations specifically provided for in the Cenvat Credit Rules, including clearance of inputs as such and, after the 2009 amendment, write-off of inputs as obsolete or unfit for use. The Board circular also contemplated reversal only where inputs were written off or provisioned for that reason. Mere closure of the plant or the fact that the inputs could not thereafter be used did not attract reversal, and Rule 14 did not apply because the credit had been correctly taken and there was no case of wrongful availment or erroneous refund.

Conclusion: The demand relating to the stock of inputs was not sustainable and the Revenue's appeal failed.

Final Conclusion: The confirmed duty on inputs cleared as such was maintained, the penalty was deleted, and the balance demand on stock was rejected, resulting in a partial success for the assessee and failure of the Revenue.

Ratio Decidendi: Cenvat credit can be reversed only when the statute specifically so provides, and neither plant closure nor inability to use the inputs, by itself, authorises reversal absent clearance as such, write-off, or wrongful availment.

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