2008 (8) TMI 652 - AT - Central Excise

Summary

Issues: Denial of input duty credit and interest demand based on CENVAT credit rules.

In this judgment by the Appellate Tribunal CESTAT, CHENNAI, the issue revolved around the denial of input duty credit amounting to Rs. 56,187/- and the demand for interest of Rs. 13,859/- by the lower authorities for the period of February to May, 2006. The denial of CENVAT credit was due to duty-paid inputs received by the appellants and subsequently returned for rectification of defects noted therein. The demand for interest was related to CENVAT credit taken on duty-paid inputs received from the manufacturer/supplier and returned for a similar purpose, but not within the prescribed period of 180 days as per Rule 4 [5(a)] of the CENVAT Credit Rules, 2004.

The crux of the challenge against the impugned demand lay in the interpretation of Rule 4[5(a)] of the CENVAT Credit Rules, 2004. This rule allows for the admissibility of CENVAT credit on duty-paid inputs even if they are removed for further processing, testing, repairing, or reconditioning by a job worker, provided the goods are returned within 180 days. Failure to receive the processed inputs within this timeframe would require the manufacturer of the final product to pay an amount equivalent to the CENVAT credit taken thereon. In this case, one consignment of inputs was not returned within the prescribed period, leading to the demand for reversal of credit. However, the inputs sent for repair to the supplier were received back within the stipulated period, absolving the appellants from the obligation to reverse the credit or pay interest on the first category of inputs.

Ultimately, the Tribunal ruled in favor of the appellants, granting a waiver of pre-deposit and stay of recovery as requested. This decision was made after a thorough examination of the records and hearing both sides, highlighting the importance of compliance with the CENVAT Credit Rules in claiming and utilizing input duty credit.