Cenvat credit recovery under Rule 14 fails when inputs are cleared on duty payment through the Cenvat account.

Rule 14 of the Cenvat Credit Rules, 2004 applies only where credit has been wrongly taken and utilised, or has been erroneously refunded. Where inputs were removed as such on payment of duty on transaction value through debit in the Cenvat account, and the admissibility of the original credit was not in dispute, recovery under Rule 14 read with Section 11D of the Central Excise Act, 1944 was not sustainable. The article also notes that the assessee's approach was consistent with a bona fide belief on the duty discharge method. On that basis, the demand and penalties were held unsustainable and the appeal was allowed.

---

---

Issues: Whether demand of amount recovered under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11D of the Central Excise Act, 1944 was sustainable where the appellant had removed inputs as such on payment of duty and by reversing credit in the Cenvat account.

Analysis: Rule 14 applies only when Cenvat credit has been taken and utilized wrongly or has been erroneously refunded. On the admitted facts, the credit taken on the inputs was not in dispute, the inputs were used in manufacture, and their removal as such was on payment of duty on transaction value by debit in the Cenvat register. In such circumstances, invocation of Rule 14 for recovery could not be sustained. The appellant's conduct was also consistent with a bona fide belief regarding the manner of discharging duty on inputs removed as such.

Conclusion: The demand and penalties were not sustainable and the appeal was allowed.

---