2009 (7) TMI 389 - AT - Central Excise

Credit on retuned goods Credit of SED paid denied on return of goods as SED not leviable at time of receipt of rejected goods - I find that in terms of Rule 16(1), the duty paid at the time of clearance is available as credit at the time of return of the goods to the factory and not the duty payable at the time of receipt of the goods. - Undisputedly, the SED was paid by the buyer irrespective of the fact that whether he was required to pay the same or not and as such duty paid would be available as credit to the assessee. - Apart from merits of the case, I am agree with the learned advocate that the demand having been raised in 2007 when the goods were admittedly received back in November, 2002 and returns were filed with the department is barred by limitation. - When the appellant has intimated the Revenue about receipt of the goods and the fact of availing credit of entire duty, they cannot be held guilty of any suppression with mala fide intent even though BED and SED were not shown separately as credit. Invoices having been filed along with intimation, it was very clear that the credit of two types of duties have been availed by the appellant. In such a scenario, I fully agree with the appellant that there cannot be any mala fide intent to avail wrong credit. The demand having been raised beyond the normal period of limitation, is time-barred. Demand and penalty not sustainable

Summary

Issues:
- Availing credit of Special Excise Duty (SED) on returned goods
- Applicability of Rule 16 of CER, 2001
- Limitation period for raising demand

Availing credit of Special Excise Duty (SED) on returned goods:
The appellant, engaged in manufacturing cosmetics, cleared goods to a buyer who later rejected and returned them for re-labelling. The dispute centered on availing credit of SED on the returned goods. The lower authorities denied the credit, arguing that SED was exempted at the time of return. However, the appellant contended that Rule 16 of CER, 2001 allowed them to avail credit of duty paid at the time of removal, regardless of the duty's applicability at the time of return. The appellate tribunal agreed, emphasizing that duty "paid" at clearance is eligible for credit upon return, even if the buyer paid the duty. The tribunal rejected the lower authorities' reasoning and upheld the appellant's right to credit for the SED paid during clearance.

Applicability of Rule 16 of CER, 2001:
The tribunal analyzed Rule 16(1) of CER, 2001, which permits an assessee to take Cenvat credit of duty paid at the time of removal when goods are returned for re-making or other reasons. The tribunal clarified that the credit is based on duty "paid" at clearance, not duty payable upon return. Despite the lower authorities' argument that only Basic Excise Duty (BED) was payable upon return, the tribunal emphasized that the duty "paid" at clearance, including SED, is eligible for credit. Even if the buyer cleared the goods under their invoices, the duty paid remains creditable to the assessee. Therefore, the tribunal upheld the appellant's right to credit under Rule 16 of CER, 2001.

Limitation period for raising demand:
Regarding the limitation period for raising the demand, the appellant received the returned goods in November 2002 and informed the revenue authorities promptly. However, the demand was raised in 2007, beyond the statutory limitation period. The tribunal agreed with the appellant that the delay in raising the demand was unjustified, considering the timely intimation and filing of returns. Despite the absence of separate columns for BED and SED in the filed forms, the tribunal found no mala fide intent in availing the credit. As a result, the tribunal deemed the demand as time-barred and set aside both the demand and penalty, granting relief to the appellant.

This judgment by the Appellate Tribunal CESTAT, Ahmedabad, delivered by Ms. Archana Wadhwa, Member (J), clarified the rights of the appellant to avail credit of SED on returned goods under Rule 16 of CER, 2001, emphasizing the distinction between duty "paid" at clearance and duty payable upon return. The tribunal also highlighted the importance of adhering to the limitation period for raising demands, ultimately ruling in favor of the appellant and setting aside the demand and penalty.