Credit reversal on clearance of inputs and capital goods as such suffices; duty cannot be demanded on deemed manufacture.

Where inputs or capital goods are cleared as such after credit has been taken, compliance is achieved by reversing the credit under Rule 57AB of the Central Excise Rules, 1944. The Tribunal followed settled Larger Bench and earlier decisions to hold that duty cannot be demanded on a deemed manufacture theory when the goods are removed in the same form after credit reversal. The demand and interest were therefore not sustainable, and the impugned order was set aside.

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Issues: Whether, on clearance of inputs and capital goods as such after availing credit, the manufacturer was required to pay duty or was only required to reverse the credit taken.

Analysis: The Tribunal noted that the appellant had cleared the inputs and capital goods as such after reversing the credit availed. The dispute turned on the effect of Rule 57AB of the Central Excise Rules, 1944. Relying on the settled position laid down by the Larger Bench and earlier Tribunal decisions, the Tribunal held that where inputs or capital goods are cleared as such, the proper requirement is reversal of the credit availed, and not confirmation of duty on the footing that the goods are deemed to have been manufactured.

Conclusion: The demand and interest could not be sustained.

Final Conclusion: The impugned order was set aside and the appeal succeeded.

Ratio Decidendi: When inputs or capital goods are removed as such after credit has been taken, compliance is achieved by reversal of the credit under the applicable rule, and duty cannot be demanded on the premise of deemed manufacture.

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