2008 (1) TMI 780 - AT - Central Excise

Summary

Issues:
- Appeal against denial of credit availed by the Respondent under Rule 16 of Central Excise Rules, 2000.
- Interpretation of Rule 3(4) of Cenvat Credit Rules 2002/2004.
- Applicability of Rule 16 of Central Excise Rules, 2002 in availing credit on returned goods.
- Compliance with Rule 9 of Cenvat Credit Rules for availing credit based on specified documents.
- Judicial precedents supporting the availing of credit based on supplier's invoice.

Analysis:
1. The appeal was filed by the Revenue against the denial of credit availed by the Respondent under Rule 16 of Central Excise Rules, 2000. The Respondent, engaged in manufacturing Cylinder Liners and Engine parts, cleared goods under concessional rate of duty, which were later returned by the buyer as defective goods. The adjudicating authority denied the credit, stating that credit should have been taken at the time of removal of goods from the factory. The Commissioner (Appeals) set aside this decision, leading to the appeal before the Tribunal.

2. The Revenue argued that Rule 3(4) of Cenvat Credit Rules 2002/2004 required the buyer to pay duty equal to the credit availed on input/capital goods. On the other hand, the Respondent availed credit based on the invoice issued by the supplier under the Cenvat Credit Rule, supported by judicial precedents from the Punjab and Haryana High Court.

3. The Tribunal observed that Rule 16 of Central Excise Rules, 2002 allowed the assessee to take credit on goods returned to the factory for re-making, refining, or other reasons. The Respondent availed credit as per Rule 16(1) of the said Rules, treating the returned goods as inputs under Cenvat Credit Rules. The Respondent complied with Rule 9 of Cenvat Credit Rules by availing credit based on specified documents, as required.

4. The Tribunal further noted that the supplier had paid higher duty on the returned goods, which was accepted by the department. The Respondent availed credit based on the supplier's invoice, and the High Court rulings supported the position that the Revenue did not suffer any loss as the modvat credit was taken only on duty paid by the assessee. Consequently, the Tribunal rejected the appeal filed by the Revenue, upholding the Commissioner (Appeals) decision.

In conclusion, the Tribunal's detailed analysis of the relevant rules and precedents supported the Respondent's right to avail credit on returned goods as per the provisions of Rule 16 of Central Excise Rules, 2002, and in compliance with the requirements of Cenvat Credit Rules.