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2015 (12) TMI 1004 - CESTAT CHENNAI

2015 (12) TMI 1004 - CESTAT CHENNAI - TMI - Demand of equal amount of credit availed on the duty paid goods returned under Rule 16 (2) o Central Excise Rules - Denial of refund claim - Held that:- There is no dispute on the facts that certain quantities of finished goods were rejected and returned by the customers for various reasons and the cenvat credit of duty paid was taken by the appellants under Rule 16(1) and subsequently the rejected goods were sold in auction as such and cleared on paym .....

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essee s appeal and from July, 2007 to March, 2010 in the Revenue s appeals.

It is established beyond doubt that no process has been carried out on the returned goods. Therefore, on the question of whether first part of sub-rule or the second part of sub-rule of Rule 16 is applicable, we find on the very same issue has been dealt in detail by the Tribunalís co-ordinate Bench, Mumbai in the case of M/s. Apollo Tyres Ltd. Vs. CCE, Pune-II (2010 (2) TMI 846 - CESTAT, MUMBAI) allowed the .....

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are not liable for any penalty and the same is also set aside. - Decided in favour of assessee. - Appeal E/80/2007, Appeals E/61, 64, 66, 68, 69,71/2012 - Final Order No. 41632- 41637 / 2015 - Dated:- 26-11-2015 - Shri R. Periasami, Technical Member Shri P.K. Choudhary, Judicial Member For the Petitioner : Shri R. Parthasarathy, Adv., For the Respondent : Ms. Indira Sisupal, AC (AR), ORDER Per: R. Periasami Both the assessees appeal and six Revenues appeal are taken up together for disposal as .....

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in auction and the appellants are paying duty at the time of removing the goods as per the transaction value. It was alleged that the appellants are not reversing equal amount of cenvat credit availed for the rejected goods. After detailed investigation, a SCN dated 28.11.2005 was issued demanding differential duty and education cess between the cenvat credit taken and duty paid on the clearances to the dealers and also proposed interest and penalty under Section 11 AC of the Act. The adjudicat .....

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the rejected goods were brought under Rule 16(1) of CER and duty paid on the transaction value when the goods were re-sold. The adjudicating authority issued a SCN following the principles of natural justice, rejected the refund claim. Against this, the respondents filed appeals before the Commissioner (Appeals) and the lower adjudicating authority in his order dated 28.10.2011, by following the Tribunal s decision in the case of Apollo Tyres Ltd. Vs. CCE, Pune-III - 2011 (272) E.L.T. 84 (Tri. - .....

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ed by the customers on account of technical defects, quality/ dimensional defects, cancellation of orders/indent, cancellation of schedule and change of schedule etc. He submitted that the same goods were after inspection, resold under auction to the highest bidder on as is where is basis . While clearing them they pay excise duty as per the transaction value at the time of resale. He drew the attention of the Bench to the allegation in the SCN at para 6 and 6.1 at page 119, where the department .....

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CN. Once, the adjudicating authority has held that mere visual inspection is not a process, which amounts to manufacture. Therefore, they are clearly attracted to 16(2) second leg in any other case and they have correctly paid the duty. He also submitted that in this case, there is no dispute on the applicability of 16(1) or 16(2) and there was no reason to seek the Commissioner of Central Excise issue to issue any guidelines under Rule 16(3). Whereas, the Commissioner while confirming the dem .....

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urther submitted that this Tribunals order has been accepted by the department and no appeal has been filed by the Revenue. 5. On limitation, he submitted that the demand is hit by limitation and out of the total demand of ₹ 1,13,47,938/- was hit by limitation and submitted that they have filed TR-1 returns for the month of February to March, 2003 and he drew out attention to page 73 and 85 of the paper book, wherein TR-1 returns at column 6A and 7B, they have clearly indicated that retur .....

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ntire credit taken on the rejected goods returned to their factory and filed refund claims for the difference between credit taken and duty payable on the transaction value on resale. He reiterated the findings of the OIA and submitted that the Commissioner (Appeals) allowed their appeal by following the Tribunals decision in th case of Apollo Tyres Ltd. (supra). He further submitted that again they have changed their method of paying duty only on the transaction value w.e.f. October, 2012, whe .....

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g on behalf of the Revenue reiterated the findings of the OIO. On the limitation, she submitted that the returns are filed before the Superintendent under Rule 12, whereas returns of duty paid goods rejected was received under Rule 16(1), where the intimation was filed before the authority. She drew our attention to para 5.8 of the OIO and submitted that the appellants having one unit at Maharashtra and the other unit at Chennai and followed two types of practice which was clearly brought out in .....

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, duty paid goods can be returned only for remarking, refining, reconditioning and the word used in any other purposes should be interpreted in line with Section 3 of CEA. She reiterated the grounds f appeal and relied on the following citations:- 1. Toyota Kirloskar motor Pvt. Ltd. Vs. CCE, LTU, Bang. 2008 (225) ELT 385 (Tri.- Bang.) 2. Markfed HDPE Sacks Plant Vs. CCE, Ludhiana 2011 (271) ELT 396 (Tri.- Del.) 3. Hindalco Industries Ltd. Vs. CCE 2007 (215) ELT 547 (Tri.-Mum.) 8. We have careful .....

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ere is no dispute on the facts that certain quantities of finished goods were rejected and returned by the customers for various reasons and the cenvat credit of duty paid was taken by the appellants under Rule 16(1) and subsequently the rejected goods were sold in auction as such and cleared on payment of duty on the transaction value in terms of second leg of sub-rule (2) of Rule 16. Revenues contention is that the assessees should have paid the amount equal to the cenvat credit taken at the .....

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es appeal and from July, 2007 to March, 2010 in the Revenues appeals. Since the whole issue revolves on interpretation of Rule 16, the same is reproduced as under:- 16. Credit of duty on goods returned to the factory.- (1) Where any goods on which duty has been paid at the time of removal thereof are subsequently returned to the factory for being re-made, refined, re-conditioned or for any other reason, the assessee shall state the particulars of such return in his records and shall be entitle .....

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on the value determined under sub-section (2) of section 3 or section 4 or section 4A of the Act, as the case may be. (3) If there is any difficulty in following the provisions of sub-rule (1) and sub-rule (2), the assessee may receive the goods for being re-made, refined, re-conditioned or for any other reason and may remove the goods subsequently subject to such conditions as may be specified by the Commissioner. As seen from the above, we find that the sub-rule (1) stipulates circumstances u .....

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rried out on the returned goods. Therefore, on the question of whether first part of sub-rule or the second part of sub-rule of Rule 16 is applicable, we find on the very same issue has been dealt in detail by the Tribunal s co-ordinate Bench, Mumbai in the case of M/s. Apollo Tyres Ltd. Vs. CCE, Pune-II (supra) allowed the appeal. The relevant paragraph of the Tribunal s order is reproduced as under:- 4. I have given careful consideration to the submissions. The case on merits would rest on cor .....

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arise out of any process of manufacture and hence the credit taken by the assessee requires to be reversed under Rule 16(2). The Tribunal held that, if the process to which the goods returned by the original consignee were subjected to did not amount to manufacture, the amount of credit availed under sub-rule (1) of Rule 16 had to be reversed under sub-rule (2). In the instant case, the tubes returned by the original consignee were removed as such without any process whatsoever. Even the show- .....

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other reason . Learned SDR has chosen to read the underlined expression ejusdem generis with the preceding expressions (re-made, refined, etc.). He means to say that, under sub-rule (1) of Rule 16, duty-paid goods returned by a customer can be brought back to the factory of production only for some kind of a process. On the other hand, the learned counsel has argued that such goods could be brought back into the factory of production for any other reason also. He submits, the appellant cleared t .....

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der sub-rule (1) should be subjected to some process. If this process does not amount to manufacture, the assessee shall pay an amount equal to the CENVAT credit taken under sub-rule (1), at the time of the second clearance. If the process amounts to manufacture, they shall pay duty at the appropriate rate based on the value determined under Section 4 of the Act. The expression in any other case found in the second part of sub-rule (2) is significant. In my view, a case in which the manufa .....

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-3 intimation. In their reply to the show-cause notice also, they did not claim that the goods returned by the first consignee were subjected to any process before its second clearance to other units. Neither the original authority nor the first appellate authority entered any finding to the contra. In the order-in-original, on the other hand, there is an observation to the effect that the appellant had removed the goods as such without carrying out any process. The order-in-original was upheld .....

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pression any other case figuring in the second part of sub-rule (2). It would follow that the duty paid by the appellant on their second clearances of tubes is in order and no additional amount of duty can be demanded from them. 6. In the result, the demand of duty is set aside on merits and consequently there can be no penalty on the appellant either. The appeal is allowed with consequential relief to the appellant. Further, this Tribunal Bench in the case of Craftsman Automation (P) Ltd. Vs. C .....

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eceived 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 case may be. The assessees have not subjected the returned goods to any process and, therefore, they are covered by the second limp of Rule 16(2), in the light of Tribunal's decision in Apollo Tyres Limited Vs Commissioner of Central Excise, Pune-III [ 2010-TIOL-549-CESTAT-MUM ]. The case law cited by learned SDR .....

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reement with the above decisions and the same are applicable to the present case as the issues are identical and the duty paid goods are rejected and returned to the factory of the assessee and without doing any processes the said goods were sold by auction to third party as is where is basis and cleared on payment of excise duty on the transaction value as per Section 4 of the Central Excise Act. 10. The Revenue relied on the Tribunal decision in the case of Toyota Kirloskar Motor Pvt. Ltd. Vs. .....

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