Cenvat credit reversal on duty-paid goods cleared without manufacture is unsustainable where revenue neutrality applies.

Cenvat credit need not be reversed where pipes were cleared on payment of duty but the process undertaken did not amount to manufacture. The Tribunal applied the settled principle that credit already taken on duty-paid inputs or goods is not to be reversed merely because the goods are later treated as non-dutiable, and it relied on earlier decisions following the same approach. It also noted revenue neutrality, since the duty paid would otherwise be refundable. The demand to reverse credit or pay duty was therefore unsustainable, and the assessee was not required to reverse the Cenvat credit.

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Issues: Whether the assessee was required to reverse Cenvat credit availed on pipes cleared on payment of duty, when the process undertaken did not amount to manufacture.

Analysis: The Tribunal followed the settled position that where duty has been paid on inputs or goods later treated as non-dutiable, the credit need not be reversed. It noted that the same principle had been applied in earlier decisions, and that the situation also gave rise to revenue neutrality because the duty paid would otherwise be refundable.

Conclusion: The assessee was not required to reverse the Cenvat credit, and the demand to reverse credit or pay duty was unsustainable.

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