CENVAT credit reversal cannot be demanded for identical goods when duty-paid DTA clearances were accepted on the same basis.

Identical goods cleared to EOUs and against ICB could not be treated differently from duty-paid DTA clearances when the Department had accepted those DTA clearances on transaction value without insisting on reversal of corresponding CENVAT credit. On those facts, the demand for credit reversal and the related penalty were held unsustainable, because the Department could not adopt an inconsistent stand for the same goods merely by changing the characterisation of the removals. The cited High Court principle on removal of inputs as such supported this approach. The appeal succeeded, the impugned order was annulled, and consequential relief was granted.

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Issues: Whether the demand of CENVAT credit and penalty was sustainable on the footing that goods cleared to EOUs and against ICB were only imported or locally procured inputs removed as such, despite the same goods being accepted on DTA clearances on payment of duty on transaction value.

Analysis: The same goods supplied to EOUs and against ICB were also cleared to DTA on payment of duty on transaction value, and in those DTA clearances the Department had not insisted on reversal of corresponding CENVAT credit. Subsequent appellate orders accepted this factual position. In such circumstances, the Department could not adopt a different stand for identical goods merely because they were cleared to EOUs or against ICB. The reasoning was further supported by the principle applied in the cited High Court decision that removal of inputs as such, on the facts presented, would not attract liability to reverse credit in the manner alleged by the Department.

Conclusion: The demand and penalty were not sustainable and were set aside in favour of the assessee.

Final Conclusion: The appeal succeeded and the impugned order was annulled, with consequential relief as admissible under law.

Ratio Decidendi: Where the Department accepts duty-paid DTA clearances of identical goods on transaction value without requiring reversal of credit, it cannot, on the same facts, treat supplies of those goods to EOUs or under ICB as liable to CENVAT credit reversal merely by characterising them differently.

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