CENVAT credit remains available when inputs are cleared on duty equal to or above the credit taken, even without manufacture.

CENVAT credit on inputs was treated as admissible even where the processing activity was held not to amount to manufacture, provided the inputs were cleared on payment of duty equal to or higher than the credit taken. The commentary states that earlier tribunal and High Court decisions treated such duty payment as a reversal of the credit availed, so disallowance of credit, interest and penalty was considered unsustainable on the facts discussed. The impugned demand was therefore described as not sustainable.

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Issues: Whether CENVAT credit availed on inputs was admissible where the assessee's process was held not to amount to manufacture but the inputs were cleared on payment of duty equal to or higher than the credit taken.

Analysis: The issue was treated as settled by earlier tribunal and high court decisions holding that, even if the manufacturing process does not amount to manufacture, CENVAT credit is not deniable where the inputs are cleared on payment of duty and such payment operates as reversal of the credit availed. The conclusion was applied to the assessee's case, and the impugned order disallowing credit, interest, and penalty was found unsustainable.

Conclusion: The CENVAT credit demand was not sustainable and the appeal was allowed.

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