Cenvat credit reversal not required for stock and work-in-process where exemption was opted under the notification.

Cenvat credit taken on inputs lying in stock, in process, or contained in finished goods was not required to be reversed when the manufacturer opted for exemption under Notification No. 30/2004-CE. Rule 9(2) of the Cenvat Credit Rules, 2002 was inapplicable because the exemption was not linked to a value- or quantity-based clearance limit in a financial year, and Rule 6(1) also did not apply where the inputs were used in the manufacture of goods that were dutiable at the time of such use. The factual position was not disputed by the Revenue, and the Larger Bench view, as affirmed by the Supreme Court, was treated as applicable.

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Issues: Whether Cenvat credit taken on inputs lying in stock, in process, or contained in finished goods was required to be reversed when the manufacturer opted for exemption under the notification, and whether Rule 9(2) or Rule 6(1) of the Cenvat Credit Rules, 2002 could be invoked for such reversal.

Analysis: The exemption under Notification No. 30/2004-CE was not one based on the value or quantity of clearances in a financial year, which is the situation specifically covered by Rule 9(2) of the Cenvat Credit Rules, 2002. The rule therefore did not require reversal in the present facts. Rule 6(1) was also found inapplicable because the respondents' case was that the inputs on which credit had been taken were used in the manufacture of goods which were dutiable at the time of such use and manufacture. The Revenue did not contradict that factual averment. The earlier Larger Bench view, as affirmed by the Supreme Court, was held applicable.

Conclusion: Reversal of Cenvat credit was not payable on the facts of the case, and the Revenue's appeal was liable to fail.

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