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2016 (3) TMI 66 - AT - Central ExciseReversal of credit equal to the cenvat credit availed on the input - damaged/rejected goods cleared - Respondents are alleged to have failed to pay duty equal to the duty taken as credit on the inputs cleared as damaged/rejected prior to use in manufacture of final product as prescribed - Held that - Inputs sold as scrap in terms of Section 4 of the Act on transaction value has originated from the manufacturing process followed in the petroleum industry. Once the input is rejected during manufacturing process and sold at the transaction value under Section 4 of the Act, the dept. has no case for asking the reversal of credit equal to the cenvat credit availed on the input. It is immaterial if the shape & size as well as classification of the input remains the same after rejection. It is different matter if the said rejected barrels are used as such for different purpose. These are considered to be waste for the appellants as these are not qualified as per the quality standard adhered by them. The dept. has not proved that the appellants have received more value from the buyer of rejected barrels than the value shown in the invoices for charging Central Excise duty. It is also not the case that the rejected barrels are recycled & purchased again by the appellants. In view of above, it seems to be more assumption & presumption as pleaded by the appellants, based upon which show cause notice issued & confirmed by the lower adjudicating authority since the dept. has not found any hole in procedure adopted by the appellants on receipts, manufacturing, clearance and accounting of transactions which is based on Standard Operating Procedures under which every single material is assigned an unique number/codes as explained by them in their defence reply. In the circumstances as discussed above do not find any merit in the case, therefore the impugned order is not sustainable under the law - Decided against revenue
Issues:
Revenue's appeal against the order-in-appeal of the Commissioner (Appeals) dated 10.09.2008. Analysis: The case involved an appeal filed by Revenue against an order-in-appeal of the Commissioner (Appeals) dated 10.09.2008. The Respondents, a company, cleared a significant number of inputs as damaged/rejected goods without reversing the Central Excise duty equivalent to the actual credit availed. The Respondents cleared the inputs at a lower transaction value than the original purchase value, leading to an alleged failure to pay duty equal to the credit availed on the damaged/rejected goods. The Respondents availed CENVAT credit on the purchase of the inputs but paid Central Excise duty on the lower value, resulting in a shortfall of duty payment. A show cause notice was issued, and the adjudicating authority confirmed the duty shortfall along with interest and a penalty. The Commissioner (Appeals) set aside the order-in-original of the adjudicating authority, leading to Revenue's appeal before the Appellate Tribunal. After hearing both sides, the Tribunal examined the arguments and the impugned order-in-appeal. The Commissioner (Appeals) had considered the process of rejection of inputs by the company, involving quality control checks and subsequent rejection stages during the manufacturing process. The Tribunal found the reasoning and conclusions of the Commissioner (Appeals) to be legally correct and unassailable. Consequently, the Appellate Tribunal upheld the impugned order, dismissing the appeal filed by Revenue. In conclusion, the case revolved around the duty payment shortfall by a company on inputs cleared as damaged/rejected goods. The Tribunal upheld the decision of the Commissioner (Appeals) based on the detailed analysis of the rejection process followed by the company and found no reason to interfere with the impugned order. The judgment highlights the importance of adhering to standard procedures and quality standards in manufacturing processes to determine the duty liability on cleared goods.
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