CENVAT credit reversal requires prior verification of duty paid against credit taken; remand ordered for factual examination.

A demand for reversal of CENVAT credit could not be sustained without first verifying whether the excise duty paid on the final clearances exceeded the credit taken on imported goods. The appellant had specifically claimed that duty discharged on the cleared membranes was higher than the credit availed, but that factual contention had not been examined. The Tribunal held that even if the activity did not amount to manufacture, no reversal would arise if duty paid was in excess of the credit taken. The matter was remanded for factual verification, and the question of manufacture was left open before the adjudicating authority.

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Issues: Whether the demand of reversal of credit was sustainable without first determining whether the excise duty paid on the final clearances exceeded the CENVAT credit taken on the imported goods.

Analysis: The appellant had specifically asserted that the excise duty discharged on the cleared membranes was higher than the credit availed on the imported membranes. That contention had not been examined by the adjudicating authority. The Tribunal held that, even assuming the activity did not amount to manufacture, no reversal of credit would arise if the duty paid was in excess of the credit taken. The matter therefore required factual verification by the adjudicating authority. The question whether the activity amounted to manufacture was kept open for evidence before the adjudicating authority.

Conclusion: The matter was remanded for verification of whether the duty paid exceeded the credit taken, and if so, no reversal of credit would be payable.

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