Cenvat credit reversal on exempted goods failed where factual findings showed reversal already made and no substantial question of law arose.

An exemption dispute under Notification No. 3/2001 concerned whether credit had to be reversed for inputs lying in stock and in semi-finished or finished goods when opting for exemption. The Tribunal's factual finding that the assessee also manufactured dutiable papers, used common inputs for both exempted and dutiable products, and had already reversed credit on inputs used in exempted papers was ative. On that basis, the demand was not sustainable and the Revenue's challenge failed because no substantial question of law arose.

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Issues: Whether the manufacturer was required to reverse credit in respect of inputs lying in stock and contained in semi-finished or finished goods when opting for exemption under Notification No. 3/2001.

Analysis: The exemption question turned on the factual position recorded by the Tribunal that the assessee was also manufacturing dutiable papers, that common inputs were used in both exempted and dutiable products, and that credit was being reversed in respect of inputs used in the exempted papers. On that footing, the Court held that the demand could not be sustained as raising no substantial question of law.

Conclusion: The issue was answered against the Revenue and in favour of the assessee; no substantial question of law arose.

Final Conclusion: The appellate challenge failed because the Tribunal's factual finding on reversal of credit negatived the proposed legal question.

Ratio Decidendi: Where the assessee has reversed credit on inputs used in exempted goods and the controversy is purely factual, no substantial question of law arises.

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