Cenvat credit recovery barred after duty payment and reversal of balance credit on inputs cleared to a sister concern

Cenvat credit recovery was treated as impermissible where the disputed input was cleared to a sister concern without use in the factory, but duty had already been paid on the normal transaction value for a substantial part and the remaining credit had been reversed. The Tribunal reasoned that once the credit component stood fully paid back or reversed, the same amount could not be recovered again. It also followed an earlier decision on an identical factual pattern, which had held recovery to be barred after acceptance of duty payment on the input. Recovery of the impugned credit was therefore not justified.

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Issues: Whether recovery of Cenvat credit was sustainable when the input-related duty element had already been paid and the balance credit had been reversed.

Analysis: The disputed input was cleared to a sister concern without being used in the factory, but the record showed that the appellant had paid duty on the basis of normal transaction value for a substantial part of the amount and had subsequently reversed the balance credit. Once the credit availed in respect of the input stood fully paid back or reversed, the amount could not again be recovered. The earlier Tribunal decision on an identical factual situation for a similar period was also followed, where recovery was held impermissible after acceptance of duty payment on the input.

Conclusion: Recovery of the impugned Cenvat credit was not justified and the appellant succeeded.

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