2019 (1) TMI 1378 - AT - Central Excise

CENVAT Credit - returned goods - Rule 16 of CCR - whether on clearance of the returned goods received under Rule 16(1) of the Central Excise Rules, 2002, it is required to reverse the amount of credit availed on the quantum of duty initially paid or the rate of duty prevalent on the date of clearance of the returned goods? Held that - When the returned goods are subjected to process, which does not result into manufacture, the manufacturer shall pay an amount equal to the CENVAT Credit taken under sub-rule (1) of the said rules. In the present case, no evidence has been brought on record that the returned goods were subjected to process amounting to manufacture, therefore, the appellant is required to reverse the credit availed on the returned goods, at the time of its initial clearance from the factory. Thus, there is no discrepancy in the impugned order in confirming the demand of differential credit and interest - However, as far as penalty is concerned, the appellant could make out a case that the returned excisable goods were cleared second time from the factory on payment of duty, at lower rate, and demand notice has been issued for normal period - penalty set aside. The appeal is partly allowed.

Summary

Issues:
- Determination of whether the appellant is required to reverse the credit availed on returned goods at the time of initial clearance from the factory.
- Imposition of penalty equivalent to the duty or credit availed.

Analysis:

Issue 1:
The central issue in the appeal was whether the appellant was obligated to reverse the credit availed on returned goods at the time of their initial clearance from the factory. The appellant had cleared excisable goods to their depot and later brought them back to their factory, availing CENVAT Credit on the duty paid during the initial clearance. The dispute arose when the goods were again cleared by the appellant at a lower duty rate without reversing the actual credit availed. The appellant argued that there was ambiguity in the recovery mechanism and contended that the excess credit could not be recovered without a clear directive. The Revenue, on the other hand, asserted that since no manufacturing process was conducted on the returned goods, the appellant was required to reverse the CENVAT Credit availed. The Tribunal examined Rule 16 of the Central Excise Rules, 2002, which stipulates that if the goods are not subjected to a manufacturing process, the manufacturer must pay an amount equal to the credit taken. As there was no evidence of manufacturing process on the returned goods, the Tribunal upheld the demand for reversing the credit availed at the time of initial clearance.

Issue 2:
Regarding the imposition of penalty equivalent to the duty or credit availed, the appellant argued that penalizing them equal to the duty amount was unjustified as they had cleared their own manufactured goods against excise invoices. The Tribunal considered the circumstances where the goods were cleared a second time from the factory at a lower duty rate, and a demand notice was issued within the normal period. The appellant had also paid the differential duty with interest. In light of these factors, the Tribunal deemed the penalty equivalent to the duty or credit availed as unwarranted. Consequently, the penalty was set aside, and the appeal was partly allowed to that extent.

In conclusion, the Tribunal upheld the demand for reversing the credit availed on returned goods but found the imposition of penalty equivalent to the duty unjustified in the given circumstances, leading to the partial allowance of the appeal.