Cenvat credit reversal is not required when returned used bottles and crates were never taken on credit before removal.

Reversal of Cenvat credit under Rule 3(4) was held inapplicable where old and used bottles and crates were received back without any credit having been taken on those returned goods, and were later removed to a sister concern. The credit originally taken on new bottles and crates had already been used in payment of duty on the final product, and those inputs were not removed as such. The rule applies only when inputs on which credit has been taken are removed as such; where no credit was availed on the returned goods, no reversal can be demanded. The limitation issue was not necessary to the final determination.

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Issues: Whether reversal of Cenvat credit was required under Rule 3(4) of the Cenvat Credit Rules, 2004 when old and used bottles and crates were received back without any credit having been taken on such returned goods and were thereafter removed to a sister concern.

Analysis: Credit originally taken on new bottles and crates had already been utilised in payment of duty on the final product, and those inputs were not removed as such. On later receipt of old and used bottles and crates, no Cenvat credit was availed at all. The condition for reversal under Rule 3(4) applies only where inputs on which credit has been taken are removed as such. As no credit was taken on the returned used goods, no reversal could be demanded. The limitation finding was not independently required for the final determination.

Conclusion: Reversal of Cenvat credit was not payable and the assessee succeeded on merits.

Ratio Decidendi: Rule 3(4) of the Cenvat Credit Rules, 2004 applies only to removal as such of inputs on which credit has been taken; if no credit is taken on returned goods, no reversal can be demanded on their subsequent removal.

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