Revenue-neutral CENVAT credit reversal fails where duty paid on clearances exceeds the credit availed.

CENVAT credit reversal was not warranted where the assessee had already discharged excise duty on the cleared products in an amount exceeding the credit availed, making the exercise revenue neutral. The Tribunal applied the settled principle that, if the duty actually paid is higher than the credit taken, no further reversal of credit is required even when the activity is alleged not to amount to manufacture. The undisputed duty paid on waste, having already been discharged through PLA, did not call for further recovery. Accordingly, the demand for reversal of CENVAT credit was set aside.

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Issues: Whether CENVAT credit was liable to be reversed when the assessee had discharged excise duty on the cleared products in an amount higher than the credit taken, even if the activity undertaken was alleged not to amount to manufacture.

Analysis: The duty paid on the products cleared was not disputed and was found to exceed the amount of credit availed. In such a situation, the demand for reversal of credit was held to fail on the principle that the exercise was revenue neutral. The Tribunal applied the settled principle that where the duty liability actually discharged is more than the credit taken, no further reversal of credit is warranted. The small amount of duty on waste, which had already been paid through PLA and was not disputed, did not survive for further recovery.

Conclusion: The demand for reversal of CENVAT credit was set aside and the appeal was allowed to that extent. The undisputed amount already paid required no further proceedings.

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