2006 (12) TMI 338 - AT - Central Excise

Manufacturers denied Cenvat credit on scrapped goods for lack of evidence. Excise duty demand upheld.

The Tribunal held that manufacturers were not eligible for Cenvat credit on scrapped goods as no manufacturing process was conducted on such goods. ... Demand - Cenvat - Defective goods returned by customers Issues involved: Admissibility of Cenvat credit on rejected and scrapped goods u/s Central Excise Act.Summary:Issue 1: Admissibility of Cenvat credit on rejected and scrapped goodsThe appellants, manufacturers of excisable goods, received back their finished goods rejected by customers due to defects and availed Cenvat credit against customers' invoices. The excise duty demand of Rs. 5,67,018/- was raised for Cenvat credit taken on scrapped goods during July 2001 to Oct 2003. The Joint Commissioner confirmed the demand and imposed penalty u/s 11AC of the Central Excise Act. The Commissioner (Appeals) upheld the order, leading to the appeal before the Tribunal.Details:The Tribunal noted that no manufacturing process was carried out on the goods for which the credit was taken. The appellants argued that goods with defects were repaired and returned to customers on payment of duty, citing a precedent. However, there was no evidence that rejected goods were returned to customers after repair and payment of duty. Consequently, the Tribunal held that the appellants were not eligible for credit, affirming the order and dismissing the appeal.