Revenue-neutral clearance duty can neutralise Cenvat credit disputes and defeat denial of credit.

Cenvat credit demand was considered unsustainable where the goods were cleared on payment of central excise duty and the duty paid on clearance exceeded the credit originally availed, making the dispute revenue neutral. The Tribunal's earlier reasoning treated duty paid on such clearances, even where the activity was regarded as non-manufacture, as effecting reversal of the entire Cenvat credit. On that basis, denial of credit did not survive because no effective revenue loss remained. The issue was therefore resolved in favour of the assessee.

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Issues: Whether the demand of Cenvat credit was sustainable when the goods were cleared on payment of central excise duty and the duty paid exceeded the credit availed, rendering the dispute revenue neutral.

Analysis: The appellant had paid central excise duty on clearance of the goods at a value higher than the Cenvat credit originally availed. On the reasoning adopted by the Tribunal in earlier decisions, duty paid on clearance of goods, even where the activity is treated as non-manufacture, operates as reversal of the entire Cenvat credit. In such a situation, no sustainable demand for denial of credit survives because the exercise is revenue neutral.

Conclusion: The demand of Cenvat credit was not sustainable and the issue was decided in favour of the appellant.

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