2009 (7) TMI 971 - AT - Central Excise

Cenvat/Modvat credit - Rejected returned goods - Held that - Rule 16 allows a manufacturer to receive back the rejected goods and to avail the credit of duty originally paid by them under the cover of the invoice issued at the time of clearance of the goods - appeal allowed.

Summary

Issues:
Interpretation of Rule 16 of Cenvat Credit Rules, 2002 regarding availing duty credit on rejected goods based on self-issued invoices.

Analysis:
The judgment involves a dispute over the interpretation of Rule 16 of the Cenvat Credit Rules, 2002, concerning the availing of duty credit on rejected goods using self-issued invoices. The appellants claimed duty credit of Rs. 1,27,611/- on rejected goods based on their own original copy of the invoice. The lower authorities contended that credit on returned goods is permissible only if received as inputs under the Cenvat Credit Rules. They emphasized that credit can be availed based on the invoice issued by a manufacturer for clearance of inputs, not by the appellant themselves.

The presiding judge, Ms. Archana Wadhwa, disagreed with the reasoning of the lower authorities. She highlighted that Rule 16 allows a manufacturer to reclaim rejected goods and avail credit of the duty originally paid through the invoice issued during goods clearance. The judge noted that the objection raised by the authorities regarding the necessity of an invoice issued by the manufacturer of the inputs is satisfied when considering rejected goods as inputs. The judge emphasized that if rejected goods are deemed inputs, the appellant, as the manufacturer, can issue invoices covering these goods, in line with Rule 7. The judge cautioned that accepting the authorities' reasoning would render Rule 16 ineffective, defeating its purpose.

Consequently, the judge set aside the impugned order and ruled in favor of the appellants, granting them consequential relief. The judgment clarifies the interpretation of Rule 16 in the context of availing duty credit on rejected goods, ensuring that manufacturers can claim credit based on self-issued invoices when reclaiming rejected goods.