Input credit reversal on clearances as such defeats duty demand treated as manufacture

Credit taken on inputs cleared as such to a sister unit was required to be reversed, and the Tribunal applied settled coordinate and Larger Bench precedent to hold that such reversal was sufficient. It rejected the demand raised by treating the clearances as manufacture by the appellant, finding that the impugned duty demand could not survive once the inputs had been cleared on reversal of credit. The issue was therefore resolved in favour of the appellant, and the demand was held unsustainable.

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Issues: Whether credit availed on inputs cleared as such to a sister unit was required to be reversed, and whether duty could be demanded treating such clearances as manufacture by the appellant.

Analysis: The dispute related to clearance of inputs during July 2000 to May 2001 after reversal of the credit already taken. The Tribunal noted that the same issue had been settled earlier by coordinate and Larger Bench decisions holding that where inputs are cleared as such, the credit availed is to be reversed. Applying that settled position, the Tribunal accepted the appellant's contention that reversal of credit was sufficient and the impugned demand could not stand.

Conclusion: The issue was decided in favour of the appellant, and the demand was unsustainable.

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