Exemption notifications and Chapter X compliance bar fixed-percentage reversal of common input credit on cleared goods.

Clearances made under an exemption notification, with the prescribed Chapter X procedure duly followed, did not require reversal of 8% or 10% of the value on account of common input credit. The Tribunal applied its earlier view, consistent with Dharamsi Morarji Chemical Co. Ltd. and the Bombay High Court's affirmation, and held that the demand for a fixed-percentage reversal could not survive merely because CENVAT credit had been taken. The impugned orders were set aside and the dispute was resolved in favour of the assessee on the exemption and credit-reversal issue.

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Issues: Whether reversal of 8% or 10% of the value of clearances was required when the goods were removed under Notification No. 82/84 and the prescribed Chapter X procedure had been followed.

Analysis: The appeals turned on an identical question already decided in the appellant's favour by the same Bench in an earlier matter, which had followed the Tribunal's decision in Dharamsi Morarji Chemical Co. Ltd. and the Bombay High Court's affirmation. The Bench found no reason to depart from that view. Since the procedure under the notification had been followed, the demand to reverse 8% or 10% of the value on account of common input credit did not survive.

Conclusion: The requirement to reverse 8% or 10% was negatived and the appeals succeeded.

Final Conclusion: The impugned orders were set aside and the dispute was resolved in favour of the appellant on the exemption and credit-reversal issue.

Ratio Decidendi: Where clearances are made under an exemption notification and the prescribed procedural conditions are complied with, reversal of a fixed percentage of value on common inputs cannot be insisted upon merely because CENVAT credit was taken.

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