Revenue neutrality defeats Cenvat credit denial where duty paid on final products matches or exceeds input credit.

Where the duty paid on the final product is not less than the Cenvat credit taken on inputs, the transaction may be treated as revenue neutral and a duty demand is not warranted on those facts. The Tribunal distinguished the Larger Bench ruling relied on by the Revenue, found the assessee had procured the goods and availed credit, and held that no purpose would be served by demanding duty. It treated the matter as on the same footing as the earlier Keetex decision, accepted revenue neutrality, and concluded that denial of credit and the consequential demand were not sustainable.

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Issues: Whether denial of Cenvat credit and confirmation of duty, interest and penalty was sustainable where the assessee's transaction was revenue neutral.

Analysis: The Tribunal distinguished the Larger Bench ruling relied upon by the Revenue and held that the facts were different. It found that the assessee had procured the goods, taken credit, and the duty paid on clearance was not less than the credit availed. On the facts, the exercise was revenue neutral and no purpose would be served by demanding duty. The Tribunal also found the case to be on the same footing as the earlier decision in Keetex, where similar revenue-neutrality had been accepted.

Conclusion: The denial of credit and the consequent demand were not sustainable; the impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Where the duty paid on the final product is not less than the credit taken on inputs and the overall exercise is revenue neutral, duty demand is not warranted.

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