2017 (8) TMI 66 - AT - Central Excise

CENVAT credit - Revenue is of the view that the returned goods by the buyers were not sold after removing the defects, as buyers are quality cautious while receiving the goods, therefore, if the goods have been rejected once, they will not take it back. Therefore, it was alleged that the appellant has availed CENVAT wrongly - Held that - the appellant has produced the evidence wherein the rejected goods has been cleared on payment of duty after rectifying the defects, no contrary evidence has been produced by the revenue - demand set aside. Valuation - It was alleged that as the appellant has cleared goods to their related persons at lower price, therefore, they required to pay duty of deferential value - Held that - the appellant is clearing goods to related persons fact as well as to the other buyers on different prices. Therefore, the appellant is required to pay duty on the goods cleared to the related persons at the value on which the goods have been cleared to buyers. Liability of interest - supplementary invoices - Held that - as per the decision of SKF India Ltd. 2009 (7) TMI 6 - SUPREME COURT , the appellant is required to pay on supplementary invoices. Appeal allowed in part - part matter on remand.

Summary

Issues:
1. Denial of Cenvat credit under Rule 16 of the Central Excise Rules 2002
2. Clearances of goods to related persons at lower prices
3. Demand of interest on supplementary invoices

Issue No. I: Denial of Cenvat credit under Rule 16
The appellant availed Cenvat credit for defective goods returned by buyers, which were later cleared after rectifying the defects. The Revenue alleged wrongful credit availed of ?46,34,733. The Tribunal found evidence of goods being cleared after rectification, setting aside the demand as no contrary evidence was presented by the Revenue.

Issue No. II: Clearances of goods to related persons at lower prices
The appellant cleared goods to related persons at lower prices compared to other buyers. The Tribunal held that duty should be paid on goods cleared to related persons at the value for other buyers. The demand of ?2,85,123 was confirmed along with interest and penalty for non-payment of interest on the differential value.

Issue No. III: Demand of interest on supplementary invoices
The appellant was required to pay interest on supplementary invoices as per the SKF India Ltd. case. The Tribunal noted that the appellant claimed to have paid ?3,873 towards interest, but the matter needed verification. The case was remanded to the adjudicating authority to confirm if the interest on supplementary invoices was paid.

In conclusion, the Tribunal:
a) Set aside the demand of ?46,34,733 for denial of Cenvat credit
b) Confirmed the demand of ?2,85,123 for clearances to related persons, along with interest and penalty
c) Remanded the matter to verify if the interest on supplementary invoices was paid. The appeal was disposed of with these terms.