CENVAT credit denial fails where duty paid on cleared goods exceeds credit availed despite dispute over manufacture.

CENVAT credit cannot be denied merely on the allegation that pickling and oiling of HR coils did not amount to manufacture, where the assessee consistently classified the goods, cleared them on payment of duty, and the duty paid on clearance exceeded the input credit availed. The Tribunal proceeded on this narrower factual basis rather than deciding the abstract manufacture question, and held that the credit position could not be disputed in such circumstances. Reliance on a departmental circular and Section 11D was found insufficient to justify denial of credit on the facts presented.

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Issues: Whether CENVAT credit could be denied on the footing that pickling and oiling of HR coils did not amount to manufacture, when the assessee had cleared the goods on payment of duty and the duty paid exceeded the credit availed.

Analysis: The dispute turned on the effect of the assessee's admitted practice of undertaking pickling and oiling of HR coils, classifying the goods consistently and clearing them on payment of duty. The Tribunal did not finally decide the abstract question whether the activity amounted to manufacture. Instead, it proceeded on the narrower and decisive footing that the assessee had paid duty on clearance of the goods in an amount greater than the CENVAT credit taken on the inputs. Relying on the earlier judicial view applied in similar matters, it held that once duty has been discharged on the clearances in excess of the credit availed, the credit availment cannot be disputed merely on the allegation that the activity was not manufacture. The reliance placed by the adjudicating authority on the departmental circular and on Section 11D was held insufficient to sustain denial in the present facts.

Conclusion: The denial of CENVAT credit was unsustainable and the assessee succeeded.

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