CENVAT removal of inputs as such was dutiable under the unamended rule, not mere credit reversal.

During June 2001 to February 2003, removal of inputs as such on which CENVAT credit had been taken attracted duty under the unamended Rule 3(4) of the Cenvat Credit Rules, 2001/2002, requiring payment equal to the duty leviable on the goods at the applicable valuation basis. The later amendment from 01.03.2003, which shifted the liability to reversal of credit availed, did not apply retrospectively to earlier removals. The appellate authority therefore applied the correct rule for the relevant period, and the duty demand was sustained.

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Issues: Whether, during the period June 2001 to February 2003, inputs removed as such on which CENVAT credit had been taken were liable to duty on the value determined under the then existing Rule 3(4) of the Cenvat Credit Rules, 2001/2002, and not merely by reversing the credit availed.

Analysis: The relevant rule in force during the material period required the manufacturer, on removal of inputs as such from the factory, to pay an amount equal to the duty of excise leviable on such goods at the applicable rate on the value determined under Section 4 of the Central Excise Act, 1944 or the relevant valuation provision. The amended version, effective from 01.03.2003, changed the obligation to payment of an amount equal to the credit availed, but that amendment could not govern removals made earlier. The adjudicating authority had applied the amended provision to an earlier period, whereas the appellate authority applied the correct rule in force during the relevant time.

Conclusion: The inputs cleared as such during the relevant period were exigible to duty on the basis prescribed by the unamended rule, not merely by reversal of credit. The demand was and the assessee's appeal failed.

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