Full reversal of input credit can satisfy a conditional exemption notification, with delayed reversal potentially attracting interest.

Full reversal of NCCD credit on inputs can be treated as non-availment of credit for purposes of a conditional exemption under Notification No. 6/2002, where the exemption is available only if credit under the Cenvat Credit Rules is not taken. The document states that the appellant had initially taken credit for a short period but later reversed the entire amount, and that such reversal cured the objection based on prior availment. The exemption bar therefore ceased to operate, although delayed reversal could still attract interest liability. On that basis, denial of exemption solely because credit had been temporarily taken was not sustainable.

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Issues: Whether reversal of the NCCD credit taken on inputs could be treated as non-availment of credit so as to satisfy the condition in Notification No. 6/2002 and restore eligibility to exemption.

Analysis: The exemption under Notification No. 6/2002 was conditional upon non-availment of credit on inputs under Rule 3 or Rule 11 of the Cenvat Credit Rules, 2002. The appellant had taken credit of NCCD for a short period, but later reversed the entire amount. The reversal was held to have the effect of treating the credit as not availed, following the settled principle that subsequent reversal can cure the objection based on availment of credit. Since the credit stood fully reversed, the exemption bar ceased to operate, though the delay in reversal gave rise to interest liability.

Conclusion: The appellant was held entitled to the exemption under Notification No. 6/2002, and the denial of exemption solely on the ground of temporary availment of credit was set aside.

Ratio Decidendi: Full reversal of credit can be treated as non-availment of credit for the purpose of satisfying a conditional exemption notification, subject to any consequential interest liability arising from delayed reversal.

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