Cenvat credit on rejected goods under Rule 16 turns on receipt, accounting, and reliable records before re-clearance.

Cenvat credit on rejected or returned goods under Rule 16 of the Central Excise Rules depended on proof that the goods were actually received in the factory, properly accounted for, and later cleared after repair or rectification on the basis of reliable records. The existing record was insufficient to resolve the factual disputes, including the absence of separate records, invoice correlation, and duty payment claims. The matter was therefore remanded to the adjudicating authority for fresh verification and a new decision after granting a reasonable opportunity of hearing.

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Issues: Whether the assessee was entitled to Cenvat credit on rejected goods received in the factory under Rule 16 of the Central Excise Rules, 2002.

Analysis: The availability of credit depended on whether the rejected or returned goods were actually received in the factory and properly accounted for, and whether the subsequent clearance after repair or rectification was supported by reliable records. The existing record was not sufficient to conclusively resolve the factual disputes, including the absence of separate records and the rival claims regarding invoice correlation and duty payment, and the matter required detailed verification by the adjudicating authority.

Conclusion: The issue was remanded to the adjudicating authority for fresh decision after verification and grant of reasonable opportunity of hearing.

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