Modvat/Cenvat opt-out permitted with reversal of attributable credit and re-quantified demand upheld

Opting out of the Modvat/Cenvat scheme from 31.03.2001 was treated as permissible, and the demand had to be re-quantified after reversal of credit attributable to inputs, work in progress and final products, with any surplus balance in the register expunged. The Tribunal found this approach fair and consistent with the scheme, rejected the proposal to demand the entire credit for the relevant period, and held that the earlier decision on reversal of credit did not apply because the dispute concerned opt-out from the scheme rather than absence of reversal machinery. The impugned order and corrigendum were upheld.

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Issues: Whether the order of the Commissioner (Appeals) permitting the appellant to opt out of the Modvat/Cenvat scheme from 31.03.2001, directing re-quantification of the demand and prescribing reversal and expunging of credit, was legal and proper.

Analysis: The appellant sought to opt out of the Modvat/Cenvat credit scheme after 31.03.2001, but the first appellate authority allowed the opt-out from 31.03.2001 and directed re-computation of the demand after requiring reversal of credit attributable to inputs, work in progress and final products, with any surplus balance in the register to be expunged. The Tribunal found this approach to be fair and in accordance with the scheme, and held that the proposal in the original order to demand the entire credit for the relevant period was rightly rejected. The Tribunal also held that the cited earlier decision on reversal of credit was inapplicable because the present dispute concerned opt-out from the scheme, not the absence of machinery provisions for reversal.

Conclusion: The impugned order and corrigendum were upheld and the challenge to the re-quantified demand failed.

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