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2008 (8) TMI 353 - AT - Central ExciseReturned goods - appellant reversed the credit at the time of clearance of waste and scrap and subsequently, filed the claim for refund of the same - When there is no process or manufacture carried out on the goods brought back to the factory, the same are cleared as waste and scrap, the credit of duty availed is required to be reversed in toto, inasmuch as, the provisions of Rule 16(2) are not applicable. refund of credit reversed not applicable
Issues: Refund claim for Modvat credit on goods cleared as waste and scrap without destruction process.
Analysis: 1. The appellant originally cleared Crankshafts to their customer on payment of duty, which were later rejected and brought back to the factory for further processing under Rule 16(1) of Central Excise Rules, 2002. The appellant sought permission for destruction of the rejected goods and intended to clear them as waste and scrap. However, it was observed that no destruction process was carried out, and the goods were cleared without any mutilation or destruction, simply by declaring them as waste and scrap. 2. The Commissioner (Appeals) noted that when no process is undertaken on returned finished goods, the appellant must reverse the equal amount of credit availed at the time of clearance. As per Rule 16, if goods brought back to the factory are cleared as waste and scrap without any manufacturing process, the duty credit availed needs to be entirely reversed. The Commissioner found no infirmity in the impugned order and rejected the appeal based on this reasoning. 3. The Tribunal agreed with the Commissioner's reasoning, emphasizing that if no manufacturing process is carried out on goods brought back to the factory and cleared as waste and scrap, the duty credit availed must be reversed completely. It was concluded that the appellant changing the nomenclature of the goods to waste and scrap without any actual destruction or processing did not comply with the provisions of Rule 16(2). 4. Therefore, the Tribunal upheld the decision of the Commissioner (Appeals) to reject the appellant's refund claim for the Modvat credit on goods cleared as waste and scrap without undergoing any destruction process or manufacturing activity. The appeal was dismissed based on the failure to adhere to the requirements of Rule 16 and the reversal of duty credit in such circumstances.
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