Cenvat credit on inputs cleared as such: payment equal to credit taken was sufficient, not duty on enhanced value.

Where inputs on which Cenvat credit had been taken were cleared as such to a sister unit, the Tribunal held that reversal or payment of an amount equal to the credit availed was sufficient compliance. It rejected the departmental attempt to demand duty on 115% of the input value, following the Larger Bench view that no higher deemed-value assessment was warranted in such cases. The demand based on enhanced assessable value was therefore unsustainable, the impugned order was set aside, and the appeal was allowed with consequential relief.

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Issues: Whether duty was payable on 115% of the cost of inputs cleared as such to a sister unit, or whether reversal of the Cenvat credit availed on such inputs was sufficient compliance.

Analysis: The dispute turned on the treatment of inputs removed as such after credit had been taken. The Tribunal followed the Larger Bench view that, where inputs on which Cenvat credit has been availed are cleared as such, the assessee is required to pay an amount equal to the credit taken, and not duty computed on 115% of the value of the inputs. The Tribunal applied the same principle to the period in question and held that the departmental demand based on enhanced assessable value could not stand.

Conclusion: The appellant was not required to pay duty on 115% of the value of the inputs cleared to the sister unit. The demand was unsustainable.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Where inputs on which Cenvat credit has been taken are cleared as such, payment of an amount equal to the credit availed is sufficient and no duty demand can be sustained on a higher deemed value basis.

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