2010 (3) TMI 987 - AT - Central Excise

Summary

Issues involved: Eligibility of Cenvat credit u/s Cenvat Credit Rules for packaged drinking water and soda water brought to factory for sale.

Summary:

Issue 1: Eligibility of Cenvat credit for goods brought to factory for sale
The Respondents, manufacturers of Packaged Drinking Water and Soda Water, brought finished goods to their factory for sale and availed Cenvat credit of duty paid on these goods. The Department contended that the Respondents were not eligible for Cenvat credit on these goods brought for sale. The Asst. Commissioner confirmed a Cenvat credit demand of Rs. 2,17,456/- along with interest and penalty, but the Commissioner (Appeals) set aside part of the demand and reduced the penalty. The Revenue appealed against this decision.

Issue 2: Interpretation of Cenvat Credit Rules
The learned D.R. argued that Cenvat credit is allowed only for inputs used in or in relation to the manufacture of final products, and credit on finished goods is permitted only for goods returned for reconditioning or reprocessing. The goods in question were brought for sale, not for processing or reprocessing, making them ineligible for Cenvat credit.

Judgment:
The Tribunal found that the goods brought to the factory for sale were not used in or in relation to the manufacture of final products, as required by Rule 3(1) of Cenvat Credit Rules, 2004. Additionally, Rule 16 of Central Excise Rules, 2002, which allows credit on goods returned for reprocessing, did not apply in this case. Therefore, the Tribunal set aside the decision of the Commissioner (Appeals) and allowed the Revenue's appeal, restoring the original order of the Asst. Commissioner for the Cenvat credit demand.