2016 (10) TMI 672 - AT - Central Excise

Denial of CENVAT credit - Rule 16 of Central Excise Rules, 2002 - manufacture of Colour Picture Tubes (CPT) - return of defective CPT - whether the denial of cenvat credit availed on returned defective CPTs mainly on the ground that no co-relation could be made between the originally cleared CPTs and the returned CPTs as also there is no proper duty paid document based on which the credit can be availed by the appellant is justified? Held that - there is no evidence to the effect that the appellants received defective picture tubes manufactured by other persons. Even such situation is covered for credit as clarified by the Board. The duty paid nature of CPTs or their identity are to be established based on the documents. Here, when the defective CPTs are returned by the service centres of the TV manufacturers the invoices under which the picture tubes were cleared by the original manufacturer were indicated. In any case, the picture tubes which were received for reconditioning are to be eventually cleared and accounted for in terms of the aforesaid rules. There is no double benefit as the credit availed by the manufacturer of TV is forming part of duty paid on the whole TV. As such the picture tube credit availed by the manufacture of TV is duly accounted for. When the defective picture tubes are received back by the appellant, they are entitled for the credit as the challan under which the same are received has got cross reference to the original clearance documents. The credit availed by the appellant in terms of Rule 16 of Central Excise Rules, 2002 cannot be denied - appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of CENVAT credit on returned defective Colour Picture Tubes (CPTs) due to lack of correlation with originally cleared CPTs and absence of proper duty paying documents.

Analysis:
The appellants, engaged in CPT manufacturing, received defective CPTs from various sources, including customers and manufacturers of colour televisions. Show cause notices were issued to recover duty on the grounds of lack of correlation between cleared and returned CPTs, double credit taken on the same goods, and absence of duty paying documents for returned CPTs. The original authority adjudicated the case, leading to the present appeal.

The denial of CENVAT credit was primarily based on the inability to establish a connection between the cleared and returned CPTs, as well as the absence of proper duty paid documents. Rule 16 of Central Excise Rules, 2002 was cited, allowing credit on goods brought back to the factory for re-making or re-conditioning, provided the particulars are recorded, and credit is taken as per CENVAT Credit Rules, 2002.

Regarding the disputed amount, the appellants argued that credit availed on CPTs returned by traders and service centres was valid as these entities were not registered with Central Excise and had not claimed credit. The returned CPTs had clear references to the duty paying documents from the original clearance, justifying the credit based on triplicate copies of invoices.

For CPTs returned from OEM manufacturers of TVs, the appellants referenced Board circulars clarifying Rule 16, emphasizing the need for known duty amounts and eventual return of goods. The denial of credit was attributed to identity verification and document insufficiency. Various field formations had issued detailed trade notices outlining procedures for such cases.

In cases of goods returned from traders/service centres, the appellants contended that their own duty payment documents could validate credit, ensuring proper accounting and clearance as per Central Excise Rules. The issue of double benefit was dismissed.

Regarding rejected CPTs from manufacturers' service centres, the credit availed by the TV manufacturers was considered part of the TV's duty payment. The appellants were entitled to credit on returned defective CPTs, supported by cross-referenced challans and original clearance documents. Proper accounting and subsequent clearance of reconditioned CPTs were mandated.

Based on the factual findings, the Tribunal ruled in favor of the appellants, stating that the credit availed under Rule 16 of Central Excise Rules, 2002 could not be denied, leading to the setting aside of the impugned order and allowing the appeal.