2007 (3) TMI 529 - AT - Central Excise

Summary

Issues: Disallowance of Cenvat credit on returned goods due to SSI exemption and compliance with Rule 16(3) of the Central Excise Rules, 2002

In this case, the issue revolved around the disallowance of Cenvat credit on duty paid returned goods by the respondents due to the consignee availing Small Scale Industry (SSI) exemption. The respondents, engaged in manufacturing insulated winding wire/bare copper wire, had cleared goods to a consignee who returned them for reworking/reconditioning. The Revenue contended that the respondents should have complied with Rule 16(3) of the Central Excise Rules, 2002, which allows for receiving back goods for repair or reconditioning. The Commissioner (Appeals) observed that the consignee did not take Cenvat credit due to SSI exemption, leading to the exceptional nature of the case. The Revenue argued that the respondents should have followed Rule 16(3) for goods returned for reworking. However, the Tribunal found that since the duty paid goods were returned for remaking/reconditioning, the respondents were entitled to Cenvat credit. The Tribunal upheld the Commissioner's decision to verify the duty paying documents and rejected the Revenue's appeal, emphasizing that there was no basis to interfere with the impugned order.

This judgment clarifies the application of Rule 16(3) of the Central Excise Rules, 2002 concerning the receipt of goods back for repair or reconditioning. It highlights that if goods are returned for remaking/reconditioning, Cenvat credit cannot be denied, even if the consignee availed SSI exemption. The Tribunal emphasized the importance of verifying duty paying documents in such cases and upheld the Commissioner's direction to allow the Cenvat credit. The decision underscores the need to adhere to relevant rules while considering Cenvat credit eligibility, particularly in situations involving goods returned for reworking, ensuring compliance with statutory provisions and protecting the rights of manufacturers to claim credits on returned goods.