2016 (5) TMI 937 - AT - Central Excise

Entitlement of Cenvat credit - Returned goods - Rule 16 - Respondent neither maintained separate records nor could establish that the same were processed and returned to the same customer or sold to others - Held that - the Respondent recorded receipt of the goods which is not disputed by the Department. Also they manufactured final product which is recorded in RG 1 register. Therefore, there is no reason to deny the CENVAT Credit. - Decided against the revenue

Summary

Issues:
Appeal against Commissioner (Appeals) order setting aside Adjudication order denying CENVAT Credit on duty paid returned goods.

Analysis:
The Respondents were involved in manufacturing various products falling under different chapters of the Central Excise Tariff Act. They availed CENVAT Credit on duty paid returned goods under Rule 16(2) of the Central Excise Rules, 2002. The dispute arose as the Respondents failed to prove that the returned goods were processed and returned to the same customer or sold to others. The Adjudicating authority confirmed the demand for CENVAT Credit, interest, and imposed a penalty equal to the duty amount. However, the Commissioner (Appeals) allowed the appeal filed by the Respondent.

Upon reviewing the Adjudication order, it was noted that the denial of CENVAT Credit was primarily due to the lack of separate records by the Respondent. Rule 16 of the Central Excise Rules, 2002 mandates that the Assessee must provide details of such receipts in their records to claim CENVAT Credit. The Respondent received duty paid goods, recorded them, and utilized them as inputs. The dispute centered on the utilization of these inputs under the CENVAT Credit Rules 2002. Since the Show Cause Notice did not allege any contravention of the CENVAT Credit Rules 2002, the Commissioner (Appeals) favored the Respondent's appeal.

The Respondent cited precedents like Luk India Pvt. Ltd. and CCE Jaipur Vs Amco India Ltd to support their case. These cases emphasized that Rule 16 of the Central Excise Rules 2002 does not necessitate the maintenance of specific records. As long as the Assessee can demonstrate the use of inputs for manufacturing final products, they are entitled to CENVAT Credit. In the present scenario, the Respondent recorded the receipt of goods and the manufacturing of final products in their registers, which was undisputed by the Department. Therefore, the CENVAT Credit could not be denied.

The Revenue's argument, supported by the case of Markfed HDPE Sacks Plant Vs CCE Ludhiana, was deemed irrelevant as it pertained to penalties under a different section of the Central Excise Act. Ultimately, the Tribunal found no fault in the Commissioner (Appeals) order and dismissed the Revenue's appeal, thereby disposing of the cross objection as well.