2015 (10) TMI 886 - AT - Central Excise

CENVAT Credit - reversal of credit for removal of inputs as such for warranty replacement - Revenue is claiming that the value should be taken as 115% or the price at which such warranty replacement parts have been sold by them from their warehouses - Held that - circular dated 1.7.2002 has been amended vide Circular No. 813/10/2005-CX dated 25.4.2005 as also Circular No.816/13/2005-CX dated 16.6.2005. We also note that exactly same issue has come up in appellant s own case in the case reported in 2014 (12) TMI 410 - CESTAT MUMBAI . - In appellants own case this Tribunal has allowed the appeal - Respectfully following the same judgment decided in favour of assessee.

Summary

Issues:
1. Reversal of cenvat credit on inputs cleared for warranty replacement.
2. Interpretation of Circular No. 643/34/2002-CX.
3. Application of Section 4 of the Central Excise Act for determining value.
4. Comparison with previous Tribunal decision regarding resale of goods.

Analysis:
1. The case involved the appellants engaged in manufacturing UPS systems who imported inputs and availed cenvat credit. Some inputs were cleared for warranty replacement, and the appellants reversed the credit equal to the credit taken. However, the Revenue claimed that the value should be 115% or the price at which the warranty replacement parts were sold from their warehouses.

2. The Tribunal noted that a previous order-in-original had been set aside by them, and the appellant sought allowance of the appeal based on this. The Revenue argued that Circular No. 643/34/2002-CX had not been considered, and the appellant should reverse the amount based on the higher value determined under Section 4 of the Central Excise Act.

3. The Tribunal considered the amendments to the circular dated 1.7.2002 and observed a similar issue in the appellant's previous case. Referring to a Larger Bench decision, it was highlighted that in cases where goods are cleared for warranty obligations free of charge without sale or resale, reversal of credit would suffice. The Tribunal, following the precedent set in the appellant's own case, allowed the present appeal.

4. The decision emphasized the distinction from a previous case where goods were resold, leading to a value available for duty payment. In the current scenario of goods being cleared for warranty obligations without sale, the Tribunal reiterated the sufficiency of credit reversal without the need for value redetermination, aligning with the Larger Bench's decision and the Board's Circular dated 25-4-2005. The appeal was allowed based on this interpretation and the consistency with past judgments.