2015 (10) TMI 2201 - AT - Central Excise

Admissibility of cenvat credit - Rejected and returned goods - Held that - On the basis of audit it was observed that appellant has not followed the procedure and conditions laid down in Rule 16(2) and 16(3) of the Central Excise Rules, 2002. It was also mentioned in the show cause notice that appellant did not maintain any records/ registers for rejected and returned goods as provided under Rule 16 of Central Excise Rules, 2002. However, it is observed from RG 23A Pt.I maintained by the appellant that entries have been made in this register regarding receipt of rejected goods in spite of the fact that no record has been specified under Rule 16 to be maintained by an assessee. The documents on the basis of which CENVAT credit is taken is also available with the appellant. The records maintained by the appellant is showing the issue slips for remanufacture of the goods and end products are duly entered in the stock registered and cleared on payment of duty - There is no evidence on record that no process was carried out on the rejected goods received by the appellant whereas, the appellant has produced documentary evidence to show that certain process were done which amounts to manufacture and cleared on payment of duty. - CENVAT credit on rejected and returned goods was correctly availed by the appellant. - Decided in favour of assessee.

Summary

Issues: Admissibility of cenvat credit for rejected goods received by the appellant.

Analysis:
The appellant filed an appeal against the first appellate authority's decision upholding the rejection of cenvat credit for rejected goods received. The appellant, represented by Shri Vinay Sejpal, argued that the rejected goods received were used for manufacturing PP Co-Polymer granules after adding necessary additives, and duty was paid on the remanufactured granules. The appellant maintained separate records for these activities. The appellant contended that the process undertaken amounts to manufacture, citing relevant case laws such as CCE vs. Amco India Limited and Sankhla Industries vs. CCE. The appellant also referred to CBEC Circular No. 15/88-CX.3 to support their argument.

The Revenue, represented by Shri Govind Jha, argued that the process undertaken by the appellant did not amount to manufacture and insisted that the cenvat credit should be reversed. The Revenue defended the first appellate authority's decision.

Upon reviewing the case records, it was noted that the show cause notice alleged non-compliance with certain rules regarding record-keeping for rejected goods. However, the appellant had maintained records of the rejected goods received, and the documents supporting the cenvat credit were available. The appellant's records showed that the rejected goods underwent processes amounting to manufacture and were cleared after payment of duty. The Revenue did not dispute the authenticity of the appellant's documents.

The Tribunal considered the issue of whether the conversion of granules into PP Granules by adding additives constituted manufacture. Although this was not the primary issue in the show cause notice, the Tribunal referred to the case law of Sankhla Industries vs. CCE, Bangalore III, which supported the appellant's position. The Tribunal also cited CBEC Circular No. 15/88-CX.3 to affirm that such conversions amount to manufacture.

Based on the detailed records maintained by the appellant and the legal precedents cited, the Tribunal held that the cenvat credit on rejected and returned goods was correctly availed by the appellant. Consequently, the appeal filed by the appellant was allowed.