Credit on returned goods under Rule 16 allowed despite invoice objection under Cenvat credit rules

Rule 16 of the Central Excise Rules, 2002 treats goods returned to the factory as deemed inputs for credit purposes, so credit of duty originally paid on such goods can be taken even if the original manufacturer's invoices are not treated as duty paying documents under Rule 7 of the Cenvat Credit Rules, 2002. The ordinary document requirements for fresh inputs do not govern this special returned-goods provision. The departmental circular supporting credit on returned goods is consistent with this interpretation, and denial of credit on the invoice objection is not sustainable.

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Issues: Whether credit of duty could be availed on returned goods under Rule 16 of the Central Excise Rules, 2002, even though the original manufacturer's invoices were not treated as duty paying documents under Rule 7 of the Cenvat Credit Rules, 2002.

Analysis: Rule 16 is a special provision dealing with goods cleared earlier and subsequently returned to the factory. It deems such returned goods to be inputs for the purpose of availing credit of the duty originally paid. The document requirements governing ordinary inputs under Rule 7 do not control the operation of Rule 16. Since the returned final products are treated as deemed inputs, the original invoices issued by the manufacturer can be accepted for credit. The position is also supported by the departmental circular clarifying that Rule 16 permits credit of duty paid by the manufacturer on such returned goods.

Conclusion: Credit was admissible to the assessee on the returned goods, and the denial on the ground of the invoices not being duty paying documents was unsustainable.

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