Cenvat credit on inputs need not be reversed when area based exemption is later opted for.

Cenvat credit validly taken on inputs while the final product was dutiable was not required to be reversed merely because the assessee later opted for area based exemption under Notification No. 50/2003-CE. The Tribunal treated the reversal provisions as requiring a specific statutory mandate before already accrued credit can be taken away, and followed the settled view that exemption at a later stage does not by itself extinguish validly earned credit. The Revenue's challenge therefore failed.

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Issues: Whether Cenvat credit on inputs lying in stock or unutilized in the credit account had to be reversed when the assessee opted for area based exemption under Notification No. 50/2003-CE dated 10.6.2003.

Analysis: The relevant statutory scheme was treated as governing credit validly taken while the final product was dutiable, and the Tribunal relied on the settled interpretation of the corresponding reversal provisions. The provision dealing with exemption on opting out of duty was read in the same manner as the earlier excise credit rule, and the identical language was held to support the same consequence. The prior decisions referred to established that valid credit already taken does not become reversible merely because the final product later becomes exempt.

Conclusion: Cenvat credit already validly taken on inputs was not required to be reversed on opting for the area based exemption, and the Revenue's challenge failed.

Ratio Decidendi: Where credit on inputs has been validly taken under the Cenvat regime, it is not liable to reversal merely because the final product subsequently becomes exempt, in the absence of a specific statutory mandate requiring such reversal.

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