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2018 (1) TMI 1266

Head Note:
CENVAT credit - imported inputs/components which were found faulty during testing process - Whether the Tribunal is right in law in allowing Cenvat Credit of the duty paid in respect of imported inputs/components which were found faulty during testing process prior to the issuance of the same into the manufacturing process of final product and the same inputs were re-exported to the overseas supplier without reversing the Cenvat Credit availed earlier? - Rule 3(5) of the Cenvat Credit Rules, 2004.

Held that: - these components have to be treated as having been used for the intended purpose and hence the duty demand of ₹ 1,71,07,253/- would not be sustainable and has to be set aside.

In the appellant’s own case decided by the Tribunal M/s. Ericsson India Private Limited Versus CCE & St, Jaipur-I [2015 (5) TMI 93 - CESTAT NEW DELHI], this very question had come up for consideration. The point of dispute in that case was as to whether in respect of the components which had been issued for manufacture and were used for assembly but later on being found to be defective was re-exported, Cenvat credit of the additional customs duty earlier taken would be reversible and the Tribunal in para 8 of the judgment after considering the Delhi High Court judgment in the case of Asahi India Safety Glass Limited v. Union of India [2004 (9) TMI 118 - HIGH COURT OF DELHI] held that such components have to be treated as having been used and hence the assessee cannot be asked to reverse the cenvat credit.

Surplus inventory which was re-exported - components written-off - demand of duty - Held that: - admittedly these components have not been used for the manufacture of the finished products and, therefore, in our view the Department is justified in invoking Rule 8 of the 1996 Rules for recovery of duty. Therefore, the duty demand of ₹ 23,15,901/- & ₹ 94,29,117/- have to be upheld.

Duty Drawback - Held that: - Since the components in respect of which the duty demand of ₹ 94,29,117/- has been confirmed have been re-exported, the customs authorities have to consider the appellants’ claim for duty drawback - penalty not sustainable.

Appeal dismissed - decided in favor of respondent-assessee.


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