2005 (2) TMI 421 - AT - Central Excise

Summary

Issues: Disallowance of Cenvat credit on returned goods

The judgment by the Appellate Tribunal CESTAT, Bangalore dealt with the disallowance of Cenvat credit amounting to Rs. 14,53,805 on aluminium extrusions and parts of electric motors that were rejected by customers and returned to the factory for refining and reprocessing. The issue revolved around the interpretation of Rule 16 of the Central Excise Rules, 2001 and Cenvat Credit Rules, 2001, specifically focusing on the condition of returning goods to the original purchasers. The Tribunal examined the meaning of "returning" in Rule 16(2) and emphasized that it signifies the goods being sent back to the original purchasers as per the rule's requirement. The appellants argued that the rule allowed them the choice to send goods to anyone, not necessarily the original purchasers, but the Tribunal rejected this argument, stating that manufacturers must adhere to the conditions of Rule 16 to avail of the facility provided. The Tribunal clarified that the change in language from "before returning" to "before being removed" in Rule 16(2) post-1-7-2001 did not benefit the appellants retroactively, as the change applied only from the amendment date onwards.

In its decision, the Tribunal held that the appellants were not entitled to Cenvat credit due to non-compliance with the conditions stipulated in Rule 16. The impugned order disallowing the credit was upheld, and the appeal was rejected by the Tribunal. The judgment emphasized the importance of adhering to the specific conditions and requirements laid down in the Central Excise Rules and Cenvat Credit Rules for availing of benefits and facilities provided to manufacturers under the central excise law.