2011 (6) TMI 434 - AT - Central Excise

Credit of duty originally paid on goods cleared, received back as defective goods for repair and reconditioning - Revenue denied credit on the ground that the credit has been taken on the basis of invoices issued by customer, who is not registered with Central Excise Department as a dealer - Held that - It is not disputed that the goods have been received under Rule 16 of the Central Excise Rules. The explanation that the invoices issued by Bath Well is for accounting purposes and for return of originally supplied goods has been overlooked. Further the claim that the appellants have taken credit based on original invoices under which the returned goods were cleared on payment of duty has been overlooked. Therefore, order of Commissioner (Appeals) is set aside and the appeal is allowed with consequential relief.

Summary

Issues:
Claim of credit under Rule 16 for goods returned as defective and reconditioned.

Analysis:
The case involved the appellant, a manufacturer of ball valves, who sent a consignment of 3300 pieces of ball valves to a party named Bath Well. The appellant received back 2112 pieces of ball valves as rejected for repair and reconditioning under Rule 16, taking credit of the duty originally paid. The issue arose when the credit was disallowed as Bath Well was not registered with the Central Excise Department as a dealer. The appellant argued that there is no requirement for the buyer to be registered under the Central Excise Act for taking credit under Rule 16. The appellant clarified that the credit was based on the original invoice issued by them when dispatching the goods to Bath Well.

The Tribunal considered the submissions and records, emphasizing that this case did not involve taking credit on cenvatable goods sold by a registered dealer but rather on goods returned as defective for repair. The Tribunal noted that the goods were received under Rule 16 of the Central Excise Rules and acknowledged that the invoices issued by Bath Well were for accounting purposes and return of the originally supplied goods. The Tribunal highlighted that the appellant had taken credit based on the original invoices under which the returned goods were cleared on payment of duty, which had been overlooked by the authorities.

Consequently, the Tribunal found that the appellant had a valid case for interfering with the order of the Commissioner (Appeals). The order of the Commissioner (Appeals) was set aside, and the appeal was allowed with consequential relief as per the law. This judgment clarified the applicability of Rule 16 in cases of goods returned as defective for repair and reconditioning, emphasizing the importance of following the relevant procedures and documentation for claiming credit under such circumstances.