CENVAT credit reversal not required where input credit was used to pay duty on final product despite non-manufacture finding.

CENVAT credit taken on inputs need not be reversed merely because slitting and cutting was held not to amount to manufacture, where the credit had admittedly been utilised to pay duty on the final product. The governing principle applied was that actual use of the credit for discharge of excise duty on output defeats a demand for reversal based only on the non-manufacture finding. On that basis, the demand and penalty were not sustainable, and the assessee succeeded.

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Issues: Whether CENVAT credit taken on inputs was required to be reversed merely because the slitting and cutting activity was held not to amount to manufacture, when the credit had admittedly been utilised for payment of duty on the final product.

Analysis: The liability to reverse credit was examined in the context of undisputed utilisation of the availled credit for discharge of excise duty on the final product. The governing principle applied was that where credit on inputs is actually used for payment of duty on the output, the mere conclusion that the activity does not amount to manufacture does not by itself create an obligation to reverse the credit. Following the binding view adopted in the cited tribunal precedent, the impugned demand and penalty could not be sustained.

Conclusion: No reversal of CENVAT credit was required, and the issue was decided in favour of the assessee.

Ratio Decidendi: CENVAT credit need not be reversed where the credit availed on inputs has been utilised for payment of duty on the final product, even if the underlying activity is held not to amount to manufacture.

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