Cenvat credit reversal under Rule 6(3)(a) is not triggered by storage loss without factory clearance.

Liability to reverse Cenvat credit under Rule 6(3)(a) arises only on clearance of exempted final products from the factory. Where the disputed goods were lost during storage and no exempted quantity was removed or cleared from the factory, the statutory condition for recovery was not met. On that basis, the demand for reversal was held inapplicable and the order setting aside recovery was upheld.

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Issues: Whether Cenvat credit attributable to inputs used in exempted goods was recoverable under Rule 6(3)(a) of the Cenvat Credit Rules, 2002 when the loss occurred during storage and there was no clearance of the exempted goods from the factory.

Analysis: Rule 6(3)(a) requires payment of an amount equivalent to the Cenvat credit attributable to inputs used in exempted final products at the time of their clearance from the factory. The record showed only storage loss of the exempted goods and no removal or clearance of the disputed quantity from the factory. In these circumstances, the statutory condition for recovery under the rule was not satisfied.

Conclusion: The demand of reversal under Rule 6(3)(a) was not applicable and the order setting aside the recovery was upheld.

Ratio Decidendi: Liability to reverse Cenvat credit under Rule 6(3)(a) arises only when exempted final products are cleared from the factory; mere storage loss without such clearance does not attract the provision.

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