Cenvat credit cannot be reversed merely because manufacture is disputed when final products are cleared on duty payment.

Cenvat credit on inputs is not required to be reversed where final products are cleared on payment of excise duty, even if the department later disputes that the underlying process amounts to manufacture. The settled principle applied is that once duty has been paid and the credit has been used for that payment, denial or reversal of credit is not justified merely on the ground that manufacture is alleged to be absent. The credit was therefore treated as admissible and reversal was held unnecessary.

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Issues: Whether Cenvat credit taken on inputs was liable to be reversed when the final products were cleared on payment of duty, even though the activity undertaken by the assessee was alleged not to amount to manufacture.

Analysis: The Tribunal followed the settled position that once the assessee clears the final product on payment of excise duty and utilises the credit for such payment, reversal of the credit is not warranted merely because the department disputes whether the process amounts to manufacture. The Tribunal relied on the consistent view expressed by the High Courts that where duty has been paid treating the activity as manufacture, Cenvat credit cannot be denied or reversed on the ground of absence of manufacture.

Conclusion: The credit was held to be admissible and no reversal was required; the Revenue's challenge failed.

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