Cenvat credit remains protected despite later exemption, and Section 11D does not compel deposit on these facts.

Validly taken Cenvat credit was treated as indefeasible, and the later exemption of the final product did not justify reversal of that credit under the Cenvat Credit Rules, 2002. The Court also held that Section 11D of the Central Excise Act, 1944 did not require the assessee to deposit the amount collected as excise duty in these circumstances. On that basis, the Department's demand was rejected and the issue was decided in favour of the assessee.

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Issues: Whether the assessee was liable to deposit the amount collected by way of excise duty under Section 11D of the Central Excise Act, 1944.

Analysis: The questions were answered by applying the settled position that validly taken Cenvat credit is indefeasible and there is no provision for reversal of such credit merely because the final product later becomes exempt. The scheme of the Cenvat Credit Rules, 2002 and the earlier binding view were treated as governing the issue, and the demand raised by the Department was rejected on that basis.

Conclusion: The issue was decided against the Department and in favour of the assessee.

Final Conclusion: The appeal failed and the dismissal left undisturbed the view that no deposit was payable on the facts found.

Ratio Decidendi: Validly taken Cenvat credit cannot be reversed merely because the final product subsequently becomes exempt, and Section 11D does not apply to compel deposit in such circumstances.

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