Revenue neutrality requires proof of admissible credit sufficient to offset excise duty; unsupported claims cannot defeat the demand.

Revenue neutrality in an excise dispute requires the assessee to prove admissible CENVAT credit sufficient to offset the duty liability; an unsupported assertion that available credit exceeds duty cannot sustain the plea. Additional customs duty discharged through DEPB scrip debits did not qualify for credit for the earlier period, while later-period eligibility required factual proof of the credit quantum. The High Court held that its jurisdiction was not excluded because the surviving dispute concerned revenue neutrality, not the rate of duty. It also upheld the extended limitation period, penalty and interest because findings of deliberate suppression and intent to evade duty remained undisplaced. The original duty consequences were restored.

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Issues: (i) Whether the departmental appeal was barred from the High Court's jurisdiction because excisability was connected with the rate of duty; (ii) Whether revenue neutrality was established through entitlement to CENVAT credit for additional customs duty debited through DEPB scrips; (iii) Whether the extended period of limitation was invocable; (iv) Whether penalty and interest were sustainable.

Issue (i): Whether the departmental appeal was barred from the High Court's jurisdiction because excisability was connected with the rate of duty.

Analysis: The assessee had raised manufacture and excisability before the original authority but confined its Tribunal challenge to revenue neutrality. The finding that the activity amounted to manufacture and the goods were excisable was consequently left unchallenged and attained finality. The surviving controversy concerned revenue neutrality and did not attract the statutory exclusion relating to determination of rate of duty.

Conclusion: The appeal before the High Court was maintainable, in favour of the Revenue.

Issue (ii): Whether revenue neutrality was established through entitlement to CENVAT credit for additional customs duty debited through DEPB scrips.

Analysis: For the period up to 31.08.2004, CENVAT credit was unavailable where additional customs duty was discharged merely by debit of DEPB scrips rather than in cash; use of the scrip extinguished its value. For the subsequent period, although policy changes could permit such credit, revenue neutrality required a factual determination of the quantum of admissible credit. The Tribunal recorded that credit exceeded duty without identifying supporting material. The assessee, having invoked revenue neutrality, bore the burden to establish the available credit and its sufficiency to offset the duty demand.

Conclusion: Revenue neutrality was not established, in favour of the Revenue.

Issue (iii): Whether the extended period of limitation was invocable.

Analysis: The original authority had recorded findings of deliberate suppression of the manufacturing activity with intent to evade duty and rejected the asserted bona fide belief. The Tribunal treated the prior demand as time-barred without reasons sufficient to displace those factual findings.

Conclusion: Invocation of the extended period of limitation was valid, in favour of the Revenue.

Issue (iv): Whether penalty and interest were sustainable.

Analysis: The original authority's findings established contraventions of the Central Excise Rules and positive conduct intended to evade excise duty. No perversity was shown in the factual basis for the statutory penalty and interest.

Conclusion: Penalty and interest were sustainable, in favour of the Revenue.

Final Conclusion: The Tribunal's acceptance of revenue neutrality and its limitation finding could not stand; the original duty, interest and penalty consequences were restored.

Ratio Decidendi: Revenue neutrality can defeat an excise demand only upon proof, by the assessee, of admissible credit sufficient to offset the duty liability; an unsupported assertion of credit cannot sustain that plea.

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