2015 (10) TMI 421 - AT - Central Excise

CENVAT Credit - return of goods - Rule 16 of the Central Excise Rules - transformers have not been returned under the original or duplicate copy of the invoice had been returned only under challans - Held that - When the show cause notice itself mentions, the goods in respect of which duty has been demanded, as non-excisable goods, I fail to understand as to on what basis the duty had been demanded, when the difference between ER-1 return figure and balance sheet figure is on account of the sale of non-excisable goods. On going through the impugned order, I find that the appellant have declared total the figure of 59,57,159/- in the ER-1 returns for 2001-2002 in respect of the Cenvat credit availed inputs used in the manufactured of transformers, in respect of which at the time of clearance of the transformers, they have paid the amount equal to the Cenvat credit availed. Whenever they used non-Cenvat credit availed inputs for repair, there is no reversal of Cenvat credit, but still these parts having been sold are reflected in the balance sheet. I find that no finding has been given by the Commissioner (Appeals) on this plea and he has simply confirmed the demand stating that the repair activity being excisable, the duty should have been paid on this amount also, while this is not the allegation in the show cause notice. Moreover in any case, the finding that repair of transformers amounts to manufacture is totally wrong finding in respect of clearance of repaired transformers no duty can be demanded, only Cenvat credit on cenvated parts used in repairs is required to be reversed. In view of this, I hold that the duty demand of ₹ 3,92,578/- is not sustainable. - Cenvat Credit cannot be denied - Decided in favour of assessee.

Summary

Issues:
1. Availment of Cenvat credit under Rule 16 for transformers returned without original invoices.
2. Duty demand discrepancy for non-excisable goods clearance.

Analysis:
1. The appellants, manufacturers of transformers, faced objections for availing Cenvat credit of Rs. 5,31,031 under Rule 16 for transformers returned for repair without original invoices. The department contended the credit was irregular due to lack of original invoices. The appellants argued they linked transformers to triplicate invoices using CT numbers embossed on them. The Tribunal found the credit was correctly taken as it was reversed upon repaired goods clearance, and no credit was taken for parts used in repairs.

2. Regarding duty demand of Rs. 3,92,578 for non-excisable goods clearance discrepancy, the department alleged a difference in declared values, leading to duty demand. The Tribunal noted the goods were non-excisable, and the duty demand lacked a basis. The appellants had declared figures in ER-1 returns for Cenvat credit availed inputs used in manufacturing transformers. The duty demand was not justified as no duty was payable on repaired transformers, only reversal of Cenvat credit on parts used in repairs was required.

In conclusion, the Tribunal allowed the appeal, holding the Cenvat credit cannot be denied, and the duty demand was unsustainable due to discrepancies in the department's allegations and lack of justification for duty payment on repaired transformers.