Cenvat credit reversal on inputs removed as such satisfied the rules; confirmed duty demand and penalty were unsustainable.

Removal of inputs as such attracted reversal of Cenvat credit rather than independent payment of duty. The text states that credit of SED availed on 01.01.2002 was admissible because the inputs had been received in the factory during the relevant period, and the appellant had already reversed the BED component before debiting the SED component from admissible credit. On that basis, compliance with Rule 57AB of the Central Excise Rules, 1944 and Rule 3(4) of the Cenvat Credit Rules, 2001 was treated as satisfied, and the confirmed demand and penalty were held unsustainable. The reversal already made for the relevant months and the SED debit on 01.01.2002 were sustained.

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Issues: Whether the appellant was required to reverse and pay SED on inputs cleared as such during April 2001 to December 2001, and whether credit of SED availed on 01.01.2002 could validly be debited against that liability.

Analysis: The controversy related to reversal of Cenvat credit on removal of inputs as such, not to independent payment of duty. The SED credit availed on 01.01.2002 was otherwise admissible during the relevant period when the inputs had been received into the factory. Since the appellant had already reversed the BED component and subsequently debited the SED component from admissible credit, the requirement under Rule 57AB of the Central Excise Rules, 1944 and Rule 3(4) of the Cenvat Credit Rules, 2001 stood satisfied. The confirmation of demand and the penalty were therefore unsustainable.

Conclusion: The demand of Central Excise duty and the penalty were set aside, while the reversal already made for the relevant months and the SED debit on 01.01.2002 were sustained.

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