Tribunal allows appeal, approves CENVAT credit for returned goods, and rejects demand for differential duty.

SHARP PUMPS (P) LTD. Versus COMMISSIONER OF CENTRAL EXCISE, COIMBATORE

SHARP PUMPS (P) LTD. Versus COMMISSIONER OF CENTRAL EXCISE, COIMBATORE - 2006 (205) E.L.T. 489 (Tri. - Chennai) Issues:
1. Denial of CENVAT credit based on the validity of documents.
2. Demand of differential duty on processed goods.

Issue 1: Denial of CENVAT credit based on the validity of documents
The appellant, engaged in water pump manufacturing, claimed CENVAT credit of Rs. 2,87,231 on final products returned by buyers under Rule 16(1) of the Central Excise Rules, 2002. The credit was based on triplicate copies of invoices issued by the appellant themselves. The Tribunal referred to a previous order where such documents were considered Cenvatable. The Tribunal analyzed Rule 16(1) which allows CENVAT credit for goods returned by buyers for remaking, refining, etc. The Tribunal noted that the duty-paying document should be deemed to have been issued by the input manufacturer. It cited Rule 11(3) specifying invoice preparation and CBEC instructions allowing the use of triplicate invoices for CENVAT. The Tribunal dismissed the Trade Notice revising procedures, holding the credit admissible.

Issue 2: Demand of differential duty on processed goods
The appellant received pumps returned by buyers under various invoices, with duty rates changing from nil to 4% and then 8%. The department demanded Rs. 14,656 as differential duty, claiming duty should have been paid at 8% on processed goods. The Tribunal examined Rule 16(2) stating duty should be paid at the rate applicable on the date of removal for goods subjected to a process amounting to manufacture. The Tribunal observed that the lower authorities considered the process as manufacture, but the show cause notice only mentioned cleaning and reconditioning, not manufacture. As there was no allegation of manufacture, the Tribunal set aside the differential duty demand, allowing the appeal.

In conclusion, the Tribunal allowed the appeal, holding the CENVAT credit admissible and setting aside the demand for differential duty on processed goods.