2015 (4) TMI 1032 - AT - Central Excise

Denial of CENVAT Credit - return goods - defective goods or waste / scrap - Held that - Allegation against the appellant is that they have not received the rejected goods and received only waste and scrap /ash on which they have taken Cenvat credit which is not permissible and said fact has been examined by the learned Commissioner (Appeals) - Commissioner (Appeals) has attained finality wherein it has been held that goods returned by the appellant are not waste and scrap/ash and they are rejected goods. Therefore, the show cause notice is not sustainable in the eyes of law. Whatever observations were made by the Commissioner after that are not part of the show cause notice. Therefore same is not required to be considered by me. In these circumstances, I hold that appellant has taken Cenvat credit correctly. Consequently the impugned order is set aside - Decided in favour of assessee.

Summary

Issues:
Appeal against denial of Cenvat credit on returned goods.

Analysis:
The appellant, a manufacturer of PVC pipes, faced denial of Cenvat credit on returned defective goods, considered waste and scrap. The appellant claimed credit under Rule 16 of the Central Excise Rules, but faced objections stating waste and scrap are not eligible for credit. The adjudicating authority upheld the denial, imposing duty, interest, and penalty. The Commissioner (Appeals) acknowledged the goods were not waste and scrap but denied credit due to lack of invoice correlation. The appellant contended that the denial was solely based on taking credit for waste and scrap, which was refuted by the Commissioner's findings. The appellant argued for credit based on the Commissioner's observations.

The Commissioner's decision was based on the mismatch between the appellant's documents and descriptions, leading to the denial of credit. The appellant emphasized that the Commissioner's findings contradicted the adjudicating authority's conclusion on the nature of the returned goods. The appellant sought to set aside the denial of credit, emphasizing the lack of waste and scrap receipt as alleged in the show cause notice. The Assistant Revenue contended that the Commissioner rightfully denied credit after scrutinizing all documents and finding discrepancies.

Upon review, the Tribunal noted the sole allegation against the appellant was the improper credit claim for waste and scrap, which the Commissioner (Appeals) refuted based on the documents. The Tribunal agreed with the Commissioner's finding that the returned goods were not waste and scrap but rejected goods. As the Revenue accepted the Commissioner's observation without challenge, the Tribunal upheld that the appellant had correctly availed Cenvat credit. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant, overturning the denial of Cenvat credit on the returned goods, as they were deemed rejected goods and not waste and scrap. The decision highlighted the importance of proper documentation and correlation in claiming credits under the Central Excise Rules, ultimately providing relief to the appellant based on the Commissioner's findings.