2007 (3) TMI 87 - AT - Central Excise

Tribunal Allows Cenvat Credit on Returned Goods Under Rule 16(3)

The Tribunal upheld the Commissioner (Appeals)'s decision, ruling in favor of the respondents and allowing Cenvat credit on duty paid returned goods. The ... Cenvat/Modvat credit – Alleged that Cenvat credit not allowed to the appellant on duty paid return back goods – Held that allegation is not correct and allowed the credit to appellant Issues: Disallowance of Cenvat credit on returned goods due to SSI exemption availed by the buyer/consignee.Analysis:1. The case involved the disallowance of Cenvat credit on goods returned by the buyer/consignee, who had availed the Small Scale Industries (SSI) exemption. The respondents had cleared duty paid material to the buyer, which was later rejected and returned for reworking/reconditioning.2. The Commissioner (Appeals) directed the Deputy Commissioner/Assistant Commissioner to verify the duty paying documents of the respondents to allow the Cenvat credit. The Revenue contended that the respondents should have complied with Rule 16(3) of the Central Excise Rules, 2002, which provides for credit on goods brought back to the factory for repair, reconditioning, or remaking.3. The Tribunal found that the respondents had removed duty paying goods to the buyer, which were returned for remaking/reconditioning. As per Rule 16(3) of the Central Excise Rules, 2002, the assessee may receive back goods for such purposes and subsequently remove them subject to specified conditions.4. The Tribunal upheld the Commissioner (Appeals)'s decision, stating that there was no basis to deny Cenvat credit to the respondents on the duty paid returned goods. The impugned order was deemed appropriate as it directed the verification of duty paying documents by the Adjudicating authority, confirming the eligibility of the respondents for Cenvat credit.5. Consequently, the appeal filed by the Revenue was rejected, and the Tribunal pronounced the decision in the open Court, maintaining the direction to allow Cenvat credit on the returned goods in compliance with the relevant rules and provisions.This detailed analysis highlights the key legal aspects and reasoning behind the judgment regarding the disallowance of Cenvat credit on returned goods due to the SSI exemption availed by the buyer/consignee.