2015 (10) TMI 1700 - AT - Central Excise

Denial of CENVAT Credit - Whether appellant has correctly availed cenvat credit with respect to appellant s own goods received back as rejected goods for repairs rectification etc. - Held that - Rule 16(1) of the Cenvat Credit Rules 2004 is not subject to the provisions of Rule 16(2) or maintenance of certain prescribed records. Rule 16(1) conveys that where any finished goods are received for remaking refining reconditioning or for any other reason than an assessee shall state the particulars of such receipt in his record and shall be entitled to CENVAT credit of duty paid on the returned goods. Since these conditions prescribed in Rule 16(1) are fulfilled therefore the credit taken can not be denied. - So far as Rule 16 (2) is concerned the same is procedural and does not indicate maintenance of special records. In Para 7 of the reply to the show cause notice as reproduced by Commissioner (Appeals) in Para 9 of his OIA dated 07.11.2012 appellant has argued that the repaired containers or rejected and repaired containers or waste of such returned containers are all cleared on payment of duty. It is not the case of the Revenue that metal containers after repair were cleared clandestinely without payment of duty by the appellant. There is no shortage of metal containers brought out by Revenue. CENVAT credit can not be denied on procedural lapses when the rejected containers were duly reflected in the CENVAT credit account and shown utilised. One to one correlation of rejected containers received with subsequent clearances is not prescribed under Rule 16 of the Cenvat Credit Rules. - Decided in favour of assessee.

Summary

Issues:
Admissibility of CENVAT credit on rejected finished goods under Rule 16 of the Cenvat Credit Rules, 2004.

Analysis:
1. The appellant filed an appeal challenging the dropping of demand of Rs. 1,94,206, which was set aside, and the demand was confirmed by the first appellate authority along with interest and an equivalent penalty under Rule 15 of the Cenvat Credit Rules, 2004. The issue revolved around the admissibility of CENVAT credit on rejected finished goods under Rule 16. The appellant argued that such goods are cleared either as rejected and repaired goods or as waste by discharging duty liability as per Rule 16, citing relevant case laws to support their claim.

2. The Revenue contended that the appellant failed to maintain records evidencing payment of duty on rectified goods as per Rule 16(2) of the Cenvat Credit Rules, 2004. The original Adjudicating authority was criticized for overlooking Rule 16(2), leading to the confirmation of demand along with interest and penalty. The Revenue argued that the first appellate authority correctly relied on case laws to support their position.

3. The Tribunal analyzed Rule 16 of the Cenvat Credit Rules, 2004, which allows an assessee to claim CENVAT credit on returned goods for re-making, refining, or reconditioning. It was observed that Rule 16(1) does not mandate the maintenance of specific records or compliance with Rule 16(2) for availing the credit. The Tribunal referred to a case law supporting the view that the credit cannot be denied if the conditions of Rule 16(1) are met. Additionally, the procedural requirements of Rule 16(2) were deemed not to necessitate the maintenance of special records.

4. The Tribunal noted that the appellant had duly reflected the rejected containers in the CENVAT credit account and cleared them on payment of duty, as per Rule 16. The absence of a one-to-one correlation of rejected containers received with subsequent clearances was not a ground for denying CENVAT credit. Consequently, the Tribunal allowed the appeal filed by the appellant, granting consequential relief as applicable.