Cenvat credit reversal on inputs as such does not extend to GTA service tax credit for their transport.

Rule 3(5) of the Cenvat Credit Rules, 2004 was construed as requiring payment only of the credit availed on inputs or capital goods removed as such, not reversal of input service credit linked to their transport. On that reading, GTA service tax credit used for transporting the inputs did not fall within the reversal mechanism for removal of inputs as such. The assessee was therefore not required to reverse the GTA credit, and the demand, interest and penalty could not be sustained.

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Issues: Whether, on removal of inputs as such after availing Cenvat credit, the assessee was required under Rule 3(5) of the Cenvat Credit Rules, 2004 to reverse not only the credit taken on the inputs but also the service tax credit availed on GTA services used for transporting those inputs.

Analysis: Rule 3(5) requires payment of an amount equal to the credit availed in respect of the inputs or capital goods removed as such. The provision was construed as limited to the credit relatable to such inputs or capital goods, and not as extending to input service credit. The Tribunal applied its earlier view that there is no provision under Rule 3(5) mandating reversal of service tax credit availed in respect of transportation services connected with those goods.

Conclusion: The assessee was not required to reverse the GTA service tax credit, and the demand, interest and penalty could not be sustained.

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