Cenvat credit refund on later exemption allowed; unutilised credit need not be reversed when final products become exempt.

Cenvat credit validly taken on inputs used for dutiable final products was not required to be reversed merely because the final products later became exempt. Applying binding jurisdictional precedent, the Tribunal noted that subsequent exemption does not defeat the basis of refund where the assessee cannot utilise the credit for payment of duty. Cash refund of the unutilised credit was therefore permissible, and the assessee was entitled to refund rather than reversal.

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Issues: Whether Cenvat credit lying in RG-23A Pt. II was required to be reversed when the final products became exempt and whether the assessee was entitled to cash refund of the unutilised credit.

Analysis: The credit had been validly taken on inputs used in the manufacture of dutiable final products, but the final products later became exempt. The binding jurisdictional precedent applied by the Tribunal held that where the assessee is unable to utilise the credit because of subsequent exemption, the basis of the refund is not defeated and cash refund is permissible. On that reasoning, the credit was not liable to reversal merely because the final products subsequently became exempt under the notification.

Conclusion: The assessee was entitled to cash refund of the Cenvat credit and the reversal was not required.

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