TaxTMI 
TaxTMI 
2025 (8) TMI 798
X X X X Extracts X X X X
X X X X Extracts X X X X
....dmitted on the following substantial questions of law: "1. Whether the appellant was not entitled to avail cenvat credit of duties paid on defective goods returned by the customers for rectification of defects if the returned goods became scrap during rectification operations? 2. Whether the processes like rectification and removal of defects on returned goods resulting in emergence of scrapped goods [or scrap] was not "manufacture' for availing cenvat credit?" 3.1. The brief facts of the case are that the appellant is manufacturing perforated nickel screen and cleared some consignment in July, 2002, October, 2002, December, 2002 and February, 2004 which were returned. When the goods were originally cleared, a duty ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y, the credit available at input stage is lesser than the duty payable on the final product except in stray cases of unintended aberation. In this case, what has been received by the appellant is definitely not an input or capital goods. It is by a deemed fiction created under Rule 16 of the Central Excise Rules, the returned goods have been given status of input. But for Rule 16 of the Central Excise Rules, 2002 the question of granting any credit for these returned goods to the appellant does not arise. When benefit of credit is made available in terms of Rule 16 of the Central Excise Rules, naturally the same is available subject to fulfillment of the conditions prescribed therein. Rule 16 provides two distinct situations namely one when....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... undertaken on the returned goods amount to manufacture and other when the process undertaken do not amount to manufacture, does not make any difference. 5. In support of his submissions, reliance was placed on the following decisions : (i) Commissioner of Central Ex. & Cus., Surat-III Vs. Creative Enterprise reported in 2009 (235) ELT 785 (Guj.); (ii) Commissioner V/s. Creative Enterprise reported in 2009 (243) ELT A120 (SC); (iii) Commissioner of Central Ex. Pune-III V/s. Ajinkya Enterprises reported in 2013 (294) ELT 203 (Bom.); (iv) CCE Bangalore-V V/S. Vishal Precision Steel Tubes & Strips Pvt. Ltd. reported in 2017 (349) ELT 686 (Kar.); (v) Commissioner of Sales Tax, Bombay V/s. Bharat P....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... on goods brought to the factory. Sub-rule (2) of Rule 16 of the Rules provides for two situations. Firstly, when the goods are subjected before being removed does not amount to manufacture and secondly, in the case of manufacturers of the goods. Sub-Rule (2) of Rule 16 of the Rules reads as under : "(2) If the process to which the goods are subjected before being removed does not amount to manufacture, the manufacturer shall pay an amount equal to the CENVAT credit taken under sub-rule (1) and in any other case the manufacturer shall pay duty on goods received under sub-rule (1) at the rate applicable on the date of removal and on the value determined under sub-section (2) of section 3 or section 4 or section 4A of the Act, as the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... equal to the CENVAT credit taken under Sub-rule (1) of Rule 16 of the Rules as there is no question of treating such goods as inputs under the CENVAT Credit Rules, 2002 so as to utilize such credit according to the Rules. 11. Reliance placed by the learned advocate for the appellant on the decision in case of Ajinkya Enterprises (Supra) of the Bombay High Court also would not be of any assistance as in the said case, assessment on decoiled HR/CR coils cleared from the factory of the assesse on payment of duty was neither reversed nor it was held that the assesse was entitled to refund of duty paid at the time of clearing of the decoiled HR/CR coils. Similarly, in the facts of the case of Vishal Precision Steel Tubes & Strips Pvt. Ltd. (....