2010 (2) TMI 846 - AT - Central Excise

Cenvat credit - returned goods - availing cenvat credit on returned goods - D-3 initmation Rule 16 - Held that - manufacturer of final product receives the goods back from the customer under sub-rule (1) and removes the same as such without undertaking any process thereon is also covered by the second part of sub-rule (2), they did not claim that the goods returned by the first consignee were subjected to any process before its second clearance to other units, appellant had removed the goods as such without carrying out any process, the lower authorities have demanded reversal of the CENVAT credit on the premise that the first part of sub-rule (2) of Rule 16 covers second clearances of finished goods as such without undertaking any process, such second clearances, as in the instant case, are also covered by the expression any other case figuring in the second part of sub-rule (2), duty paid by the appellant on their second clearances of tubes is in order and no additional amount of duty can be demanded from them, demand of duty is set aside on merits and consequently there can be no penalty on the appellant either. The appeal is allowed with consequential relief to the appellant.

Summary

Issues:
1. Interpretation of Rule 16 of the Central Excise Rules, 2002 regarding duty payment on returned goods.
2. Applicability of CENVAT credit on goods returned by the consignee.
3. Demand of duty based on the second clearances without manufacturing process.
4. Contestation of duty demand on the ground of limitation and intent to evade payment.
5. Reversal of CENVAT credit and imposition of penalty under Sections 11A, 11AB, and 11AC of the Central Excise Act.

Analysis:
1. The case revolves around the correct interpretation of Rule 16 of the Central Excise Rules, 2002. The appellant received duty-paid goods returned by a consignee without subjecting them to any manufacturing process. The dispute arises regarding the obligation to pay duty on the second clearances of these goods under sub-rule (2) of Rule 16.

2. The appellant argued that the duty-paid goods returned by the consignee could be cleared without undergoing any manufacturing process under sub-rule (2) of Rule 16. They contended that the duty paid on the second clearances was appropriate, while the Revenue claimed that duty equal to the CENVAT credit should have been paid.

3. The demand of duty was challenged on the grounds of limitation and absence of intent to evade payment. The appellant argued that there was no intent to evade duty payment, as any duty paid on the second clearances would have been available as CENVAT credit to the consignees, resulting in a revenue-neutral situation.

4. The judgment analyzed the provisions of Rule 16 in detail, focusing on whether the goods returned by the consignee required any manufacturing process before second clearances. The Tribunal interpreted sub-rule (2) to encompass cases where goods are received back without undergoing any process, concluding that the duty paid on the second clearances was appropriate.

5. Ultimately, the Tribunal set aside the demand of duty on merits, ruling in favor of the appellant. Consequently, no penalty was imposed on the appellant, and the appeal was allowed with consequential relief granted.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, and the Tribunal's interpretation of the legal provisions leading to the final decision in the appellant's favor.