Cenvat credit reversal on SSI exemption is unenforceable by demand without a statutory recovery mechanism.

Opting for SSI exemption could require reversal of Cenvat credit on inputs and finished goods in stock under the relevant excise rules, but the demand failed because the rules did not provide a machinery for assessment or recovery of that amount. The Tribunal distinguished situations where legislation later cured the defect, noting that no corresponding recovery provision had been introduced here. As a result, the liability, even if recognised, could not be enforced by demand and the assessee's appeal was correctly allowed.

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Issues: Whether, on opting for SSI exemption, the assessee was required to reverse cenvat credit attributable to inputs and finished goods in stock, and whether such amount could be recovered in the absence of a machinery provision under the relevant excise rules.

Analysis: The liability to reverse credit was recognised under Rule 57AG, Rule 9(2) and Rule 11(2) when a manufacturer opted for value-based exemption. However, the decisive question was recoverability. The impugned order followed the principle that where the statute creates a liability but does not provide a machinery for assessment or recovery, the amount cannot be enforced by demand. The Tribunal noted that, unlike the retrospective legislative cure introduced in relation to Rule 57CC and Section 11D, no corresponding recovery machinery was brought in for the present rules. The absence of such enabling provision meant the demand could not be sustained.

Conclusion: The demand was not recoverable in law and the assessee's appeal before the Commissioner (Appeals) was rightly allowed.

Final Conclusion: The revenue's challenge failed because the credit reversal obligation, without a corresponding recovery mechanism, could not sustain the impugned demand.

Ratio Decidendi: A statutory liability cannot be enforced by demand unless the enactment or rules also provide an adequate machinery for its recovery.

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