Cenvat credit on returned rejected goods is admissible under Rule 16 when original clearance invoice covers the return.

Rule 16 of the Cenvat Credit Rules permits a manufacturer to receive back rejected goods and take credit of the duty originally paid on their earlier clearance. The objection that credit could be denied because the invoice was not issued by the manufacturer of the inputs was rejected, as the returned goods are covered by the original clearance invoice. An interpretation that blocks credit in this situation would defeat the purpose of Rule 16 and make it redundant. On that basis, denial of Cenvat credit on returned rejected goods was unsustainable.

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Issues: Whether Cenvat credit was admissible on rejected goods received back by the manufacturer on the basis of its own original invoice, and whether Rule 7 could be invoked to deny such credit.

Analysis: Rule 16 permits a manufacturer to receive back rejected goods and to take credit of the duty originally paid when the goods were cleared. The objection that the invoice must be one issued by the manufacturer of the inputs was held unsustainable, because the same goods, when treated as returned inputs, are covered by the invoice issued at the time of their original clearance. An interpretation that disallows credit in such a situation would defeat the purpose of Rule 16 and render it redundant.

Conclusion: The credit was admissible and the denial of Cenvat credit was unsustainable.

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