Cenvat credit reversal on exemption applies only when unutilised credit exists; nil balance means no payment is due.

A manufacturer opting for full duty exemption is required to reverse or pay Cenvat credit only to the extent attributable to inputs lying in stock, in process, or contained in finished goods on the date of opting for exemption, and the obligation under Rule 9(2) of the Cenvat Credit Rules, 2002, or its corresponding Rule 11(2) in the 2004 Rules, applies where unutilised credit exists. Where the admitted Cenvat credit balance is nil on the relevant date, the rule is not triggered. No amount was therefore required to be reversed or paid.

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Issues: Whether a manufacturer opting for full exemption from payment of duty was required to reverse or pay any amount when the Cenvat credit balance was nil on the date of opting for exemption.

Analysis: Rule 9(2) of the Cenvat Credit Rules, 2002, corresponding to Rule 11(2) of the Cenvat Credit Rules, 2004, requires payment only to the extent of Cenvat credit relatable to inputs lying in stock, in process, or contained in finished stock on the date the exemption is opted for, and operates where there is an unutilized credit balance. On the admitted facts, the credit balance stood at nil on the relevant date, so the rule was not attracted.

Conclusion: No amount was required to be reversed or paid under the rule, and the assessee succeeded.

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