2017 (7) TMI 124 - AT - Central Excise

Clandestine removal - it was alleged that appellants have cleared the goods without reversal / payment of the equivalent credit availed on the returned goods at the time of final clearances - Rule 16 of Central Excise Rules, 2002 - Held that - reliance placed in the case of TOYOTA KIRLOSKAR MOTOR PVT. LTD. Versus COMMR. OF C. EX., LTU., BANGALORE 2007 (8) TMI 274 - CESTAT Bangalore , where it was held that Rule 16 can override Section 4 - the duty paid on transaction value is incorrect as the question of determination of transaction value arise only if the goods are subjected to any process amounting to manufacture and therefore they are required to pay an amount equal to the credit availed and not payment of duty as per transaction value - appeal dismissed - decided against appellant.

Summary

Issues:
Appeal against Commissioner (A) orders - Rule 16 of Central Excise Rules, 2002 interpretation - Availing CENVAT credit - Duty payment on returned goods - Applicability of Rule 16(2) - Precedents consideration.

Analysis:
The appeals were filed against two orders by the Commissioner (A), one rejecting the appellant's appeal and the other allowing the Department's appeal and setting aside the Order-in-Original. The issue in both appeals being common, they were disposed of together. The case involved the manufacture and clearance of excisable goods falling under specific chapters of the Central Excise Tariff Act, 1985. The appellants availed CENVAT credit on inputs and input services under the CENVAT Credit Rules, 2004. The dispute arose when finished goods were removed for demonstration, brought back to the factory under Rule 16, and then sold without undergoing any further manufacturing process. The Department alleged that the goods were cleared without reversing or paying the equivalent credit availed on the returned goods, leading to a demand for short payment of duty. The Commissioner (A) upheld the demand, prompting the present appeals.

The appellant argued that the impugned order misinterpreted Rule 16 of the Central Excise Rules, 2002 and failed to consider judicial precedents. They contended that since no manufacturing process was carried out on the returned goods, the duty paid goods should have been removed under the second part of Rule 16(2). The appellant relied on the Tribunal's decision in Apollo Tyres Ltd. Vs. CCE to support their position. On the other hand, the Department defended the impugned order, emphasizing that Rule 16 mandates payment equal to the credit taken if the goods are not subjected to a manufacturing process. They argued that the duty paid should be on the value determined under the Central Excise Act if the goods undergo a process amounting to manufacture. The Department also highlighted a Division Bench decision in a similar case.

The Tribunal, after reviewing the submissions and the relevant provisions of Rule 16, upheld the impugned orders. The Tribunal found no infirmity in the Commissioner (A)'s decision, citing the Division Bench's ruling in a similar case as a binding precedent. Consequently, both appeals were dismissed.