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2019 (12) TMI 336 - HC - Central ExciseAvailment and utilization of CENVAT credit - returned goods - Rule 16(1) of the Central Excise Rules, 2002 - manufacture of various brands of cigarettes on job work basis - certain goods were returned by Godfrey Philips India Limited for various reasons - period November, 2006 to May, 2007 - period August, 2008 to April, 2009 - inclusion of “scrapping” within the scope of Rule 16(1) of the Central Excise Rules, 2002 - sum and substance of the case of the Revenue against the respondent – assessee was that the respondent – assessee engineered the return of the so-called non marketable/non saleable cigarettes, with the intent to unlawfully avail the benefits of CENVAT credit under Rule 16 (1) of the CENVAT Credit Rules, by misleading the Revenue - imposition of penalty u/r 26 of CER. HELD THAT:- Rule 16(1) is applicable to goods on which duty had been paid at the time of removal of such goods and the same are brought back to the factory. The goods are brought back to the factory for being “re-made, refined, re-conditioned or for any other reason”. The assessee is also required to state the particulars of such receipt of goods in his records - Once the above conditions are fulfilled, the assessee becomes entitled under Rule 16(1) to take CENVAT credit of the duty paid on the returned goods as if such goods are received as inputs under the CENVAT Credit Rules, 2002. The credit shall be utilised by the assessee according to the latter Rules. It is evident that the learned Appellate Tribunal has incorrectly interpreted the scope of Rule 16(1) by bringing scrapping within the embrace of Rule 16(1) and has proceeded to legitimise the benefit of CENVAT availed by the respondent – assessee - The findings of facts returned by the Assessing Officer thus attain finality since they were not successfully impeached by the learned Appellate Tribunal. These findings extracted in extenso in the earlier part of the judgment are set forth, in brief, hereinafter to take the discussion forward and to its logical conclusion. Clearly, the goods were not brought back to the factory by the assessee to be “re-made”, “refined”, “reconditioned”, “or for any other reason” as contemplated in Rule 16(1) of the Central Excise Rules, 2002. The transactions were devices to illegally avail CENVAT credit. The intent to illegal avail CENVAT credit and escape duty was fully established - the ingredients to avail credit of duty of goods brought back to the factory, as contemplated under Rule 16(1) of the Central Excise Rules, 2002, were not satisfied. The assessee was not entitled to avail the benefit of CENVAT credit of the duty paid on the aforesaid goods and illegally availed such credit. The intent of the assessee to defraud the revenue and escape tax is thus proved. Penalty u/r 26 of CER - HELD THAT:- The ingredients of Rule 26 for imposing the penalty upon Sri R.K.Gupta, Deputy General Manager (IT & Accounts), are fully satisfied. The provisions of the Rule 26 have been duly adhered to - The order imposing penalty against Sri R.K.Gupta under Rule 26, is a lawful and just order, in the facts and circumstances of this case. Thus, CESTAT was clearly misdirected in law in its interpretation of Rule 16(1) of the Central Excise Rules, 2002 by unlawfully including “scrapping” within the scope of Rule 16(1) of the Central Excise Rules, 2002 - CESTAT also erred in law by finding that the respondent – assessee had lawfully availed CENVAT credit in the offending transaction - penalty on R.K. Gupta upheld. Appeal allowed - decided in favor of appellant.
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