CENVAT credit reversal not required for stock and finished goods under the Compounded Levy Scheme

Opting for the Compounded Levy Scheme under Notification No. 34/2001-CE did not trigger reversal of CENVAT credit already availed on inputs lying in stock, work in progress, or contained in finished goods. The proviso to Para 1 barred fresh credit on specified materials used for cold rolling, but it did not expressly require reversal of credit already taken on inputs embedded in existing stock or goods at the time of opting in. Following its earlier view, the Tribunal held that only unutilized credit standing in the account could lapse, while credit already utilized was not recoverable. The disputed credit therefore did not have to be reversed, and refund was admissible.

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Issues: Whether, on opting for the Compounded Levy Scheme under Notification No. 34/2001-CE dated 28/06/2001, the assessee was required to reverse CENVAT credit relatable to inputs lying in stock, work in progress, and finished goods containing such inputs.

Analysis: The proviso to Para 1 of the notification barred taking credit of duty paid on raw materials, components, machinery or finished products used for cold rolling, but did not expressly require reversal of credit already availed on inputs forming part of stock, work in progress, or finished goods on the date of opting for the scheme. The Tribunal followed its earlier view that, under the Compounded Levy Scheme, only unutilized credit lying in account could lapse, while credit already utilized was not recoverable. It also relied on prior decisions holding that credit relating to inputs in stock and inputs contained in finished goods was not liable to reversal in the manner suggested by the Revenue.

Conclusion: The assessee was not required to reverse the disputed CENVAT credit on inputs lying in stock, work in progress, or finished goods, and the refund was allowable.

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