2017 (9) TMI 1540 - AT - Central Excise

Tribunal sets aside demand & penalties for Cenvat credit denial on defective goods.

The Tribunal allowed the appeal, setting aside the Order-in-Appeal confirming the demand and penalties imposed on the appellant and manager for ... CENVAT credit - receipt of defective goods back into their factory - Rule 16 of CER, 2002 - It appeared to revenue that appellant was receiving broken pieces packed in bags and the same were not be eligible for Cenvat credit under the said Rule 16 of the said Rules - Held that: - Cenvat credit was admissible to the appellant - the SCN has also mentioned that the issue is recurring in nature and SCN have been issued time to time - appeal allowed - decided in favor of appellant. Issues Involved:- Eligibility of Cenvat credit under Rule 16 of Central Excise Rule, 2002 for receipt of defective goods back into the factory.Analysis:1. The appeal was filed against Order-in-Appeal No. GZB-EXCUS-000-APP-0018-16-17 dated 22/04/2016 passed by the Commissioner of Central Excise & Customs (Appeals), Meerut-II at Noida. The appellants, who were manufacturers of PVC pipes, HDPE duct pipes, and PVC pipe fittings, cleared their goods on payment of duty and took Cenvat credit of duty involved under Rule 16 of the Central Excise Rule, 2002 for defective goods received back into their factory.2. The revenue alleged that the appellants were receiving broken pieces packed in bags, which were not eligible for Cenvat credit under Rule 16. A show cause notice was issued proposing the reversal of Cenvat credit amounting to Rs. 3,34,766. The issue had been previously adjudicated through an Order-in-Original dated 27.08.2015, where the demand was confirmed, and penalties were imposed on the appellant and the manager. The appeal against this order was decided by the Commissioner (Appeals) through the impugned Order-in-Appeal dated 22.04.2016, rejecting the appeal against the confirmation of demand but allowing the appeal filed by the manager with consequential relief.3. During the hearing, the appellant's counsel referred to Final Orders passed by the Tribunal in the appellant's own case, stating that Cenvat credit was held to be admissible. The Tribunal found that the issue was no longer res-integra based on the Final Orders and allowed the appeal filed by the appellant, setting aside the impugned Order-in-Appeal that confirmed the demand and imposed penalties. Consequently, the Order-in-Original dated 27.08.2015 was held to be not legally sustainable.4. After considering the submissions and records, the Tribunal allowed the appeal, entitling the appellant to consequential relief as per law. The decision was made based on the previous rulings and the recurring nature of the issue regarding the eligibility of Cenvat credit for defective goods received back into the factory.