2016 (3) TMI 568 - AT - Central Excise

Cost of design and development charges incurred for manufacture of the pumps - inclusion to the price of the pumps for payment of an amount equal to 8% of the price as per provisions of Rule 6(3)(b) of the Cenvat Credit Rules 2004 - Held that - Appellants have taken cenvat credit on the common inputs used for dutiable as well as exempted goods, is required to reverse an amount which is equal to 8% of the value of the goods. The records revealed that the appellant has reversed an amount of ₹ 32,000/- (Rupees Thirty Two Thousand only) on the clearances of exempted goods to defence establishment. In our view, this amount which has been reversed is more than enough or sufficient compliance of the provisions of Rule 6 of Cenvat Credit Rules 2002 which was amended retrospectively by the Government of India. The retrospective amendment talks about reversal of an amount of proportionate cenvat credit availed on the inputs which are consumed for the manufacturing of exempted goods is sufficient compliance of law for availing the cenvat credit on the common inputs. We find from the records that the appellant had specifically stated before the lower authorities that the cenvat credit attributable to the pumps which are sold to defence establishment, comes to about ₹ 4250/- (Rupees Four Thousand Two Hundred and Fifty only). We accept the contentions raised by the learned CA that the amount of ₹ 32,000/- (Rupees Thirty Two Thousand only) deposited/paid by the appellant at the time of clearance of the pumps to defence establishment is more than enough to cover the cenvat credit availed on the common inputs used by them for manufacturing of the pumps which were cleared to defence establishment without payment of duty. Whether the cenvat credit availed in respect of sales returns on the basis of documents under Rule 16 of Central Excise Rules 2002 is correct or otherwise? - Held that - There is no dispute that the appellant is eligible to avail the cenvat credit on the pumps on which appropriate duty of excise was paid and cleared to their purchasers. We find that the lower authorities have not appreciated the details given by the appellant as annexed at Page No. 55 of the appeal memo. We, on perusal find that the appellant had correlated all the incoming payments with the documents which were available with them and the set was produced. The issue has been held against the appellant only on the ground that he was not able to justify that the pumps which were cleared from the factory on payment of duty were only in fact received back. We find from the papers produced before us, the findings by the lower authorities on this point are incorrect. The said document revealed that the appellant had correctly availed the cenvat credit on the pumps which were received back from their purchasers. On factual matrix, we hold that the appellant has correctly availed the cenvat credit on the sales returns of the pumps - Decided in favour of assessee

Summary

Issues:
i. Whether the cost of design and development charges incurred for manufacture of the pumps be added to the price of the pumps for payment of an amount equal to 8% of the price as per provisions of Rule 6(3)(b) of the Cenvat Credit Rules 2004; and
ii. Whether the cenvat credit availed in respect of sales returns on the basis of documents under Rule 16 of Central Excise Rules 2002 is correct or otherwise.

Analysis:

Issue (i): The appellant availed exemption under Notification No. 10/97-CE for supplying pumps to a defence establishment. The Revenue argued that the appellant should reverse 8% of the value of the design and development charges as well. The appellant contended that they had reversed an amount equivalent to 8% of the value of the goods, satisfying the provisions of Rule 6 of Cenvat Credit Rules 2002. The Tribunal found the appellant's compliance sufficient, as they had reversed an amount exceeding the cenvat credit availed on common inputs used for manufacturing the exempted goods. The retrospective amendment supported the appellant's position, and the appeal was accepted.

Issue (ii): The dispute centered on whether the appellant correctly availed cenvat credit on sales returns of pumps. The lower authorities had not properly considered the appellant's submissions and documentation. The Tribunal reviewed the evidence and found that the appellant had correlated all incoming payments with available documents, supporting their claim for cenvat credit on sales returns. The lower authorities' findings were deemed incorrect, and the appellant was found to have correctly availed the cenvat credit on the pumps received back. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant on both issues, holding that they had complied with the relevant provisions regarding the reversal of cenvat credit and the availing of cenvat credit on sales returns. The impugned order was deemed incorrect and set aside, granting relief to the appellant.