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2016 (10) TMI 678 - AT - Central ExciseTaking credit of of duty paid by the SEZ unit on returned goods - CENVAT credit - whether the appellant manufacturer who cleared finished goods to M/s DLF Ltd (SEZ Developer) under bond without payment of duty and the same were again returned to the appellant by M/s DLF Ltd (SEZ Developer) under bonded Challan for replacement, and on failure of the appellant to replace in the time permitted M/s DLF Ltd. (SEZ Developer) deposited the Excise duty, and claimed reimbursement from appellant, the same was taken credit of by the appellant, whether the said credit was rightly taken by the appellant? - Held that - the duty was paid by the SEZ Developer on non-fulfillment of the condition of the bond, as the appellant could not return the goods within the stipulated time. Such duty was admittedly paid, although under wrong head (Customs duty) and the same have been accepted by the appellant. Accordingly, I hold that the procedure of Rule 16 of Central Excise Rules, 2002 does not come in the way in denying the credit. I hold that the appellant is entitled to take credit under Rule 3 of the Cenvat Credit Rules as they have admittedly received the goods under proper documents reflecting the duty involved and the said duty have been admittedly paid on the removal of the goods, being the SEZ Developer, to the appellant - appeal allowed - decided in favor of appellant.
Issues:
- Whether the appellant was rightly allowed to take credit of Excise duty paid by SEZ Developer? - Interpretation of Rule 16 of Central Excise Rules, 2002 in the context of Cenvat credit. Analysis: Issue 1: The primary issue in this appeal was whether the appellant, a manufacturer, was justified in taking credit of Excise duty paid by the SEZ Developer when defective goods were returned. The appellant cleared finished goods to the SEZ Developer under bond without payment of duty. Subsequently, the defective goods were returned by the SEZ Developer, who paid the Excise duty and sought reimbursement from the appellant. The appellant then claimed Cenvat credit for the duty paid by the SEZ Developer. The Revenue contended that the appellant was not entitled to this credit as the goods were cleared without payment of duty initially. The Show Cause Notice proposed to disallow the credit, leading to further proceedings and the demand for interest. The Tribunal, after considering the facts and submissions, held that the appellant was entitled to take the credit under Rule 3 of the Cenvat Credit Rules. The Tribunal emphasized that the goods were received back under proper procedure and duty was paid by the SEZ Developer, which was accepted by the appellant. Consequently, the Tribunal allowed the appeal and set aside the impugned order, holding the appellant entitled to the Cenvat credit of the duty paid by the SEZ Developer. Issue 2: The second issue revolved around the interpretation of Rule 16 of the Central Excise Rules, 2002 in the context of Cenvat credit. The appellant argued that Rule 16 provided for a special provision where duty-paid goods are received back for reconditioning or other reasons. The appellant contended that since the goods were received back from the SEZ Developer on payment of duty for reconditioning and subsequent sale to other buyers, they were entitled to take the Cenvat credit. The Revenue, however, relied on the impugned order which invoked Rule 14 of the Cenvat Credit Rules to disallow the credit. The Tribunal analyzed the provisions of Rule 16 and Rule 3 of the Cenvat Credit Rules, emphasizing that the goods were received under proper documents reflecting the duty involved and paid by the SEZ Developer. The Tribunal concluded that Rule 16 did not hinder the appellant's right to claim credit under Rule 3, considering the procedural compliance and payment of duty by the SEZ Developer. Therefore, the Tribunal allowed the appeal based on the entitlement of the appellant to the Cenvat credit under Rule 3 of the Cenvat Credit Rules, read with the circumstances of the case and the provisions of Rule 16 of the Central Excise Rules, 2002.
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