2017 (10) TMI 434 - AT - Central Excise

CENVAT credit - returned goods - Rule 16(1) of Central Excise Rules 2002 - case of the Revenue is that as these returned goods have been cleared as such therefore they are required to reverse the Cenvat credit availed on these returned goods under Rule 3(5) of CCR, 2004 - Held that - those returned goods have been tested by the appellant and found that these are scrap and cannot be reused which have been cleared on payment of duty. It is not the case of the Revenue that these goods have been cleared as such without payment of duty. In that circumstances when returned goods have been tested in their factory and found scrap which has been cleared on payment of duty. Therefore, provisions of Rule 3(5) of Cenvat Credit Rules 2004 are not attracted to the facts of this case. Reliance placed in the case of M/s Tube Products of India Vs. CCE 2015 (12) TMI 1004 - CESTAT CHENNAI , where it was held that such second clearances, as in the instant case, are also covered by the expression any other case figuring in the second part of sub-rule (2). It would follow that the duty paid by the appellant on their second clearances of tubes is in order and no additional amount of duty can be demanded from them. The appellant is not required to reverse Cenvat credit equal to availed the Cenvat credit on these returned goods - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against denial of Cenvat credit under Rule 16(1) of Central Excise Rules 2002.

Analysis:
The appellant, a manufacturer of files and rasps, cleared defective goods to their sister unit, which were returned as scrap. The Revenue demanded reversal of Cenvat credit under Rule 3(5) of Cenvat Credit Rules, 2004. The consultant argued that since the goods were cleared as scrap on payment of duty, Rule 16(2) conditions were met. The AR contended that the goods were not processed and hence credit reversal was required. The Tribunal noted that the goods were tested, found to be scrap, and cleared on payment of duty, not as such without duty. Referring to the Tube Products of India case, the Tribunal analyzed Rule 16(1) and (2) which allow credit on returned goods subject to certain conditions. The Tribunal emphasized that if no process amounting to manufacture was carried out on the returned goods, duty payment was sufficient, as in this case. The Tribunal cited previous decisions supporting this interpretation and ruled in favor of the appellant, setting aside the demand for credit reversal. The impugned orders were overturned, and the appeals allowed.

This detailed analysis of the judgment highlights the key arguments presented by both parties, the Tribunal's interpretation of relevant rules, and the application of precedent cases to reach a decision in favor of the appellant regarding the denial of Cenvat credit under Rule 16(1) of the Central Excise Rules 2002.