2016 (11) TMI 1086 - AT - Central Excise

CENVAT credit - return goods / rejected goods - Polyethylene film and bags falling under Chapter 39 of the Schedule to the Central Excise Tariff Act, 1985. - Whether the reversal of CENVAT credit on the ground that the appellant was not in a position to show as to what kind of material has been crushed or reprocessed and whether it is from the scrap generated during the course of manufacture of finished goods or the goods rejected from the customers, justified? - Held that - I find that the said assertion is without any basis as at no such assertion has been made either in the order-in-original or in the appeal before the Commissioner (Appeals). The appeal before the Commissioner (Appeals) has been made only on the ground that the rejected goods were not identified as generated out of the material returned under Rule 16 of the Central Excise Rules - the order of the Commissioner (Appeals) not sustainable and is set aside - matter remanded for fresh adjudication after considering the cross objection raised by the appellant - appeal disposed off.

Summary

Issues:
1. Availing Cenvat Credit on returned goods
2. Reversal of Cenvat Credit
3. Imposition of penalty and interest
4. Challenge to confirmation of demand
5. Interpretation of Rule 16 (2) of Central Excise Rules, 2002

Analysis:

1. The appellant, a manufacturer of Polyethylene film and bags, availed Cenvat Credit under Rule 16 (1) of Central Excise Rules, 2002, on goods returned by buyers. The revenue sought an accountal of these goods to verify the credit availed. The appellant provided a detailed accountal of goods in four categories, including goods subjected to various processes and manufacturing activities.

2. The Additional Commissioner confirmed a demand of &8377; 2,70,897 and imposed an equivalent penalty under Section 11AC. The appellant paid an amount in respect of scrap cleared, but the revenue filed an appeal seeking confirmation of the demand. The Commissioner (Appeals) confirmed the demand and penalty, which the appellant challenged in a cross objection.

3. The appellant argued that they had challenged the demand in their cross objection and had already paid the amount in question. The revenue contended that the scrap generated should result in the reversal of the entire credit under Rule 16 (2) of the Central Excise Rules, 2002.

4. The Commissioner (Appeals) incorrectly stated that the appellant did not challenge the demand. The appellant asserted that the amount in question had already been paid and was for reconciliation purposes. The revenue sought reversal of credit based on Rule 16 (2) but had not raised this argument earlier.

5. The Tribunal found that the Commissioner (Appeals) order was unsustainable and set it aside. The matter was remanded for fresh adjudication considering the cross objection raised by the appellant. The appeal and cross objection were disposed of accordingly, emphasizing the need for a thorough review based on the arguments presented.

This detailed analysis of the judgment highlights the issues involved, the arguments presented by both parties, and the Tribunal's decision to remand the matter for fresh adjudication based on the grounds raised by the appellant.