Reversal of CENVAT credit can restore exemption benefit where the notification bars goods with input credit already taken.

Full reversal of CENVAT credit on inputs removes the bar in Notification No. 30/2004-C.E. that denies exemption where input duty credit has been taken. The text notes that, once the assessee proved complete reversal of the credit already availed, the exemption could be validly opted for under the Board's clarification permitting reversal in lieu of credit. On that basis, the denial of the notification benefit was unsustainable and the assessee remained entitled to exemption.

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Issues: Whether the assessee, after reversing the entire CENVAT credit taken on inputs, remained entitled to the benefit of Notification No. 30/2004-C.E. dated 9-7-2004.

Analysis: The Notification contained a proviso denying its benefit to goods in respect of which input duty credit had been taken under the CENVAT Credit Rules, 2002. The assessee produced evidence that the input credit had been fully reversed on 5-8-2004 in relation to the finished goods cleared by it. The Board's Circular No. 795/28/2004-CX dated 28-7-2004 clarified that where an assessee had the choice between exemption and CENVAT credit, credit already taken could be reversed and the exemption notification could then be opted for. On that basis, reversal of the entire credit removed the bar to exemption.

Conclusion: The assessee was entitled to the benefit of Notification No. 30/2004-C.E. and the denial of exemption was unsustainable.

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