Proportionate Cenvat credit reversal with timely interest payment defeats recovery proceedings for exempted clearances.

Proportionate Cenvat credit attributable to inputs and input services used in exempted goods was reversed, interest was paid within the prescribed period, and the reversal was supported by a Chartered Accountant's certificate. On those facts, the statutory compliance required by the relevant amendments was treated as satisfied, and the basis for recovery could not continue. The demand proceedings were therefore not sustainable, and the assessee was entitled to relief.

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Issues: Whether the demand proceedings were sustainable where the assessee had reversed the proportionate Cenvat credit attributable to inputs and input services used in exempted goods, paid the applicable interest within the prescribed period, and produced a Chartered Accountant's certificate to that effect.

Analysis: The dispute turned on whether the reversal of credit attributable to exempted clearances, coupled with payment of interest and certification by a Chartered Accountant, satisfied the statutory requirements introduced by the relevant amendments. The record showed that the assessee had already reversed the proportionate credit and paid the interest due. The Revenue did not dispute the fact of reversal. In that situation, the basis for continuing the proceedings did not survive.

Conclusion: The proceedings were not sustainable and the assessee's compliance entitled it to relief.

Ratio Decidendi: Where proportionate Cenvat credit attributable to exempted goods is reversed with interest within the prescribed period and the reversal is certified, proceedings for recovery do not survive.

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