CENVAT credit reversal barred where final product duty paid exceeded input credit, even without manufacture.

CENVAT credit reversal was held unwarranted where the assessee had paid duty on the final products in an amount exceeding the credit availed on inputs, and that factual position was not disputed. The Tribunal applied the principle that credit cannot be denied or reversed on paid-out items used in the factory merely because the process undertaken did not amount to manufacture, when the duty actually paid on the final product was higher than the input credit taken. On that basis, the demand for reversal of CENVAT credit was rejected.

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Issues: Whether CENVAT credit was liable to be reversed on paid-out items used in the factory when the duty paid on the final products exceeded the credit taken on the inputs, even if the process undertaken did not amount to manufacture.

Analysis: The respondent had paid duty on the final products in an amount higher than the CENVAT credit availed on the inputs. That finding, recorded by the first appellate authority, was not disputed in the revenue appeal. In such circumstances, the demand for reversal of credit could not be sustained. The Tribunal applied the principle that credit cannot be denied where the duty paid on the final product exceeds the duty credit available on the inputs, even if the process does not amount to manufacture.

Conclusion: The demand for reversal of CENVAT credit was rejected and the assessee succeeded.

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