Removal of inputs as such rejected where the product sold was bitumen emulsion, not the original input.

CESTAT Delhi held that the appellant was clearing bitumen emulsion, not removing bitumen input as such, so the Cenvat credit reversal, duty, interest and penalty could not be sustained. The Tribunal accepted the commercial and manufacturing explanation that bitumen emulsion is a diluted end-product sold at a lower price, and relied on the rate contract and pricing structure to reject the show cause notice's assumption that the input itself had been sold. On those facts, the allegation of removal of inputs as such failed and the consequential demand and penalties were set aside.

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Issues: Whether the appellant had removed inputs as such and was therefore liable to reverse the Cenvat credit, duty, interest and penalty demanded on that basis.

Analysis: The Tribunal found on the facts that the appellant was clearing bitumen emulsion and not bitumen as such. The reasoning accepted the commercial and manufacturing explanation that bitumen emulsion is a diluted end-product with a lower sale price than the input, and noted supporting material such as the rate contract and pricing structure. On that basis, the assumption in the show cause notice that the appellant would be selling its input as such was rejected. The finding of removal of input as such, and the consequential demand and penalties, therefore could not stand.

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

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