Input credit restriction cannot be implied where exemption notification omits it; reversal demand and consequential interest fail.

An exemption notification that does not expressly bar input credit for the relevant final product cannot be read to impose that restriction by implication. The same principle applied to Rule 57AD, Rule 57CC and Rule 6, because those provisions operate on the common basis of credit reversal for exempt or nil-rated clearances. Where the product was not covered by an express credit restriction in the notification, reversal of 8% of the value of clearances was not sustainable, and the consequential interest demand also could not survive.

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Issues: Whether, where an exemption notification does not impose a condition against availment of input credit for the relevant final product, the assessee can still be required to reverse 8% of the value of clearances under Rule 57AD/57CC of the Central Excise Rules, 1944 or Rule 6 of the Cenvat Credit Rules, 2001, and whether interest under Section 11AB of the Central Excise Act, 1944 is sustainable.

Analysis: The applicable exemption notification was read as a general notification that denied exemption only to the specified entries where the condition against availment of credit was expressly inserted. Where no such restriction was attached to the relevant product, the bar against taking input credit could not be imported by implication. The same principle governing Rule 57C was held to extend to Rule 57AD, Rule 57CC and Rule 6, since all these provisions operate on the same underlying premise concerning credit on inputs used in exempt or nil-rated clearances. As the assessee's product was not subject to the credit restriction in the notification, the demand based on reversal of 8% of the value of clearances could not be sustained.

Conclusion: The demand under Rule 57AD/57CC and Rule 6 was unsustainable and the issue was decided in favour of the assessee. The consequential interest demand also could not survive.

Ratio Decidendi: Where an exemption notification does not expressly deny the benefit of input credit for the relevant product, the credit restriction cannot be implied through Rule 57C or its statutory extensions governing exempt or nil-rated clearances.

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