2011 (12) TMI 504 - AT - Central Excise

CENVAT credit - Rule 16 of CER 2002 - return of rejected goods - Held that - rule 16 is very specific that receipt of duty paid goods in the factory of manufacturer can be allowed in respect of goods not manufactured in case this is subject to conditions prescribed u/r 16 - the conditions u/r 16 have been complied with by the assessee and therefore there is no violation - appeal allowed - decided in favor of assessee.

Summary

Issues:
1. Eligibility for CENVAT credit on partly rejected goods received by the appellant.
2. Interpretation of Rule 16 of Central Excise Rules, 2002 regarding the return of duty paid goods.

Analysis:
1. The appellant, M/s. Kelvin Process Technologies Pvt. Ltd., filed an appeal against the Order-in-Original passed by the Jt. Commissioner, which was upheld by the Commissioner (Appeals), denying them CENVAT credit for partly rejected goods received. The Department contended that the goods were originally manufactured by another entity falling under Central Excise jurisdiction. The Commissioner (Appeals) held the appellants liable under Rule 14 of CENVAT Credit Rules. However, the appellant argued that they complied with Rule 16 of the Rules, allowing receipt of duty paid goods in the factory even if not manufactured by them, subject to prescribed conditions.

2. Rule 16 of the Central Excise Rules, 2002 provides for the return of duty paid goods to the factory for various purposes. The rule allows the manufacturer to receive such goods and claim CENVAT credit as if they were received as inputs under the CENVAT Credit Rules, 2002. The rule specifies conditions under which such receipt is permitted, including situations where the goods are subjected to processes not amounting to manufacture. In cases where goods are subjected to processes amounting to manufacture, duty payment is required, which can be claimed as CENVAT credit. The Commissioner is empowered to resolve any difficulties and impose necessary conditions for safeguarding revenue interests.

3. The Tribunal found that the appellant had complied with the conditions prescribed under Rule 16 for the receipt of duty paid goods in their factory. As the conditions under Rule 16 were met, the Tribunal concluded that there was no violation by the appellant. Consequently, the Order-in-Appeal denying CENVAT credit was set aside, and the appeal by M/s. Kelvin Process Technologies Pvt. Ltd. was allowed.

In conclusion, the judgment by the Appellate Tribunal CESTAT Ahmedabad in 2011 addressed the issues of eligibility for CENVAT credit on partly rejected goods and the interpretation of Rule 16 of the Central Excise Rules, 2002. The Tribunal ruled in favor of the appellant, finding no violation of Rule 16 and allowing the appeal.