Cenvat credit reversal before clearance can amount to non-availment, preserving exemption despite no separate accounts.

Reversal of Cenvat credit before clearance of exempted goods was treated as non-availment of credit for purposes of Notification No. 30/2004-CE, so the exemption could not be denied merely because separate accounts were not maintained. The Court applied the settled principle that timely reversal neutralises the earlier credit entry and places the assessee in the same position as if credit had not been taken. It also relied on binding precedent and departmental clarification, and found the Revenue's objection on separate books insufficient. The assessee was therefore entitled to the exemption and the Revenue's challenge failed.

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Issues: Whether reversal of Cenvat credit before clearance of exempted goods could be treated as non-availment of credit so as to satisfy Notification No. 30/2004-CE, despite the absence of separate accounts.

Analysis: The notification denied exemption only where credit of duty on inputs had been taken, but the Court applied the settled principle that reversal of credit before removal neutralises the earlier availment and places the assessee in the same position as if credit had not been taken. The Court held that the departmental insistence on maintenance of separate books as a condition precedent was not justified in the light of the binding precedent on reversal of credit and the contemporaneous departmental clarification. The Court further noted that the issue stood covered by the earlier decision relied upon by the Tribunal and that no substantial question of law arose.

Conclusion: The Court held that the assessee was entitled to the benefit of Notification No. 30/2004-CE and the Revenue's challenge failed.

Final Conclusion: The appeals were rejected, and the Tribunal's view in favour of the assessee was upheld.

Ratio Decidendi: Reversal of Cenvat credit before clearance of exempted goods is treated as non-availment of credit, and exemption cannot be denied solely on the ground that separate accounts were not maintained where the governing legal position recognises such reversal as sufficient compliance.

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