Cenvat credit reversal on imported goods and job-work inputs: double demand barred, but delayed return reversal sustained.

Cenvat credit on imported goods sold as such was held not to be recoverable again where duty had already been paid on clearance, because that payment operated as reversal of the earlier credit and the corresponding demand, interest and penalty on that count were unsustainable. Credit on inputs sent to job work was required to be reversed where the goods were not received back within 180 days, and the linked interest was sustainable only to that extent. Penalty could not survive on the portion where the principal demand failed. The commentary therefore supports only a limited reversal and interest for the job-work default.

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Issues: (i) whether Cenvat credit of CVD taken on imported goods subsequently sold as such in India could be demanded again when duty had been paid at the time of clearance; (ii) whether credit on inputs sent to job work and not received back within 180 days was required to be reversed; (iii) whether interest and penalty were sustainable on the confirmed demands.

Issue (i): whether Cenvat credit of CVD taken on imported goods subsequently sold as such in India could be demanded again when duty had been paid at the time of clearance.

Analysis: The imported goods were cleared on payment of duty, and the duty paid on clearance was held to operate as reversal of the credit earlier availed. The reasoning applied was that where the credit taken has already been absorbed by duty payment on the very goods, the Department cannot again insist on reversal of the same credit. The demand on imported goods sold as such was therefore found unsustainable.

Conclusion: The demand of Cenvat credit and the related interest and penalty on this count were set aside in favour of the assessee.

Issue (ii): whether credit on inputs sent to job work and not received back within 180 days was required to be reversed.

Analysis: The inputs sent outside the factory were not received back within the stipulated period, and the requirement of reversal was treated as correctly attracted on these facts. The assessee's challenge failed on this limited issue, and the consequential interest already paid was also treated as recoverable only to that extent.

Conclusion: The reversal of credit on this count was upheld against the assessee.

Issue (iii): whether interest and penalty were sustainable on the confirmed demands.

Analysis: Penalty could not survive where the principal demand on imported goods sold as such was itself not maintainable, and interest on that portion was also liable to be set aside. However, interest linked to the upheld reversal on job-work inputs remained sustainable to that extent only.

Conclusion: Penalty was set aside, and interest was sustained only in relation to the upheld job-work credit reversal.

Final Conclusion: The order was modified by granting substantial relief to the assessee on the main credit demand for imported goods sold as such, while sustaining only the limited reversal and interest relating to inputs not received back from job work within the prescribed period.

Ratio Decidendi: Where credit already availed is effectively absorbed by duty paid on clearance of the same goods, the same credit cannot be demanded again; reversal is not separately exigible once the duty payment has served that function.

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