Revenue neutrality defeats excise duty demand where credit was availed and used to pay duty, barring Section 11D recovery.

Where an assessee had availed credit and used that credit to discharge duty, the dispute was treated as revenue neutral because the arrangement caused no net loss to the Revenue. On that basis, prior Tribunal and Supreme Court authority was applied to hold that the duty demand and the direction to deposit amounts under Section 11D of the Central Excise Act could not be sustained in the manner proposed. The demand and related direction were set aside, and consequential relief followed.

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Issues: Whether the demand of duty and the direction to deposit amounts under Section 11D of the Central Excise Act, 1944 could be sustained when the assessee had availed credit and used it for payment of duty, rendering the dispute revenue neutral.

Analysis: The assessee was found to have taken credit and discharged duty from that credit. On that footing, the entire arrangement did not cause any net loss to the Revenue. The dispute was treated as covered by prior Tribunal and Supreme Court authority recognising that where the duty/Cenvat flow is revenue neutral, the demand cannot be sustained in the manner proposed.

Conclusion: The demand and the related direction under Section 11D were set aside, and the appeal was allowed with consequential relief to the assessee.

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