2006 (9) TMI 422 - AT - Central Excise

Summary

Issues involved: Appeal against Order-in-Appeal u/s Rule 16 of Central Excise Rules for denial of Cenvat credit on rejected goods returned for repair and rectification.

Summary:
1. The appellants sought Cenvat credit of Rs. 25,765/- on rejected goods returned for repair without undergoing a manufacturing process. Revenue demanded reversal of credit u/r 16 of Central Excise Rules, imposing penalty and interest. Commissioner (A) upheld the demand, leading to the appeal before the Tribunal.

2. The appellants argued that despite no manufacturing process, the material turning to waste should not bar them from claiming credit. Conversely, the Revenue contended that without a manufacturing process, Cenvat credit on rejected goods cannot be availed.

3. Upon review, it was found that Rule 16 allows credit on goods returned for processes like remaking or refining. However, if the goods become scrap without undergoing a manufacturing process, the manufacturer must repay the Cenvat credit taken. As the returned goods were entirely scrapped, the appellant's claim of a manufacturing process was rejected. The Commissioner (A)'s decision was upheld, but the penalty was reduced to Rs. 1000/-.

(Separate Judgment by Judge: None)

(Operative portion of this Order was pronounced in open court on conclusion of hearing)