Cenvat recredit after demand is set aside is permissible when the underlying duty liability no longer survives.

Where duty earlier debited under protest in the Cenvat account was linked to a demand that had already been set aside and had attained finality, recredit was held permissible. The Tribunal found no legal infirmity in allowing suo motu recredit because the underlying liability no longer survived, and relied on prior High Court and Tribunal precedents supporting that position. The demand seeking to deny the recredit was therefore unsustainable, and the proceedings dropping such denial were sustained.

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Issues: Whether the respondent was entitled to take suo motu Cenvat credit by recrediting the amount earlier debited under protest after the duty demand had been set aside.

Analysis: The duty demand against the respondent had already been set aside and that finding had attained finality. The amount was debited under protest in the Cenvat account. In that factual situation, the Tribunal held that there was no legal infirmity in permitting recredit of the amount in the Cenvat account. The Tribunal relied on prior judicial pronouncements, including the Karnataka High Court view and earlier Tribunal decisions, to conclude that such recredit was permissible when the underlying demand no longer survived.

Conclusion: The respondent was entitled to recredit the amount in the Cenvat account, and the demand seeking to deny such credit was unsustainable.

Final Conclusion: The appeal failed and the order dropping the proceedings was sustained.

Ratio Decidendi: Where duty is paid under protest by debit in the Cenvat account and the underlying demand is subsequently set aside, the assessee may recredit the amount in the Cenvat account; denial of such recredit is not justified.

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