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Issues: Whether a manufacturer who had validly taken Cenvat credit on inputs in stock was required to reverse that credit when the final product later became exempt from excise duty under an SSI exemption notification.
Analysis: Rule 9(2) of the Cenvat Credit Rules, 2002 is in substance identical to Rule 57H(5) of the Central Excise Rules, 1944. The same language had earlier been construed to mean that validly taken credit is not liable to reversal merely because the manufacturer later opts for exemption and the final product becomes non-dutiable. The governing principle is that credit, once lawfully earned on inputs received for manufacture, is available to the manufacturer unless the rules specifically provide for cancellation or reversal. The Court aligned this provision with the earlier Supreme Court interpretation and with the consistent view taken by other High Courts.
Conclusion: The manufacturer was not required to reverse the Cenvat credit already taken, even though the final product subsequently became exempt from excise duty.
Ratio Decidendi: Where the language of the later Cenvat provision is identical to the earlier Modvat rule already construed by the Supreme Court, validly taken input credit cannot be reversed merely because the final product later becomes exempt, absent an express rule providing for such reversal.
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