Cenvat credit and repair-related duty demands fail where returned goods are traceable and the notice does not match the allegation.
Cenvat credit on transformers returned for repair could not be denied merely because the original invoices were not produced, where the goods were traceable through triplicate invoices and CT numbers and the credit was reversed when the repaired goods were cleared. The procedural lapse in documentation was insufficient to defeat credit on those facts. A duty demand based on an alleged difference between ER-1 returns and balance-sheet figures for repair-related parts was also unsustainable because the notice did not support the premise adopted in the demand and repair activity was not treated as manufacture for that purpose. The ratio emphasises traceability of goods, reversal of credit, and consistency between the notice and the demand.
Issues: (i) whether Cenvat credit taken on transformers returned for repair could be denied for want of original invoices when the goods were traceable through triplicate invoices and CT numbers; (ii) whether the duty demand on the alleged difference between ER-1 figures and balance-sheet figures in respect of repair-related parts was sustainable.
Issue (i): whether Cenvat credit taken on transformers returned for repair could be denied for want of original invoices when the goods were traceable through triplicate invoices and CT numbers.
Analysis: The transformers had been returned under challans and not under the original invoices, but the goods were linked to the invoices through CT numbers embossed on them. The credit taken was reversed at the time of clearance of the repaired goods, and no credit had been taken on the parts used in repair. In these circumstances, the procedural objection raised by the department was insufficient to deny the credit.
Conclusion: The credit was rightly taken and its denial was unsustainable, in favour of the assessee.
Issue (ii): whether the duty demand on the alleged difference between ER-1 figures and balance-sheet figures in respect of repair-related parts was sustainable.
Analysis: The demand was founded on a difference relating to non-excisable goods, while the show-cause notice proceeded on a basis not supported by the actual allegation. The reasoning that repair of transformers amounted to manufacture was held to be incorrect for the purpose of the demand. On the facts, the proper consequence, if any, was reversal of credit on cenvated parts used in repair, not the impugned duty demand.
Conclusion: The duty demand was not sustainable, in favour of the assessee.
Final Conclusion: The impugned order was set aside, the credit demand and duty demand were rejected, and the appeals were allowed.
Ratio Decidendi: Where returned goods are identifiable with the original clearances and the credit is reversed on subsequent clearance of repaired goods, Cenvat credit cannot be denied on a mere procedural lapse in documentation; likewise, a duty demand must conform to the allegation in the show-cause notice and cannot rest on an unsupported premise that repair activity itself amounts to manufacture for the purpose of the disputed demand.
TaxTMI 
AI Drafter ✕
TaxTMI 
