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2016 (10) TMI 71 - CESTAT AHMEDABAD

2016 (10) TMI 71 - CESTAT AHMEDABAD - 2017 (347) E.L.T. 189 (Tri. - Ahmd.) - Recovery of Cenvat credit - returned goods cleared as scrap - Rule 16 - Held that:- the Appellant had received in their factory the defective duty paid goods for remaking, refining, reconditioning etc. It is not in dispute that the certain quantity of such defective goods were remade/reconditioned and cleared on payment of appropriate duty. However, the major portion of the returned goods was scrapped and cleared from t .....

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aid that the process by which the defective goods are converted into scrap, should be considered as manufacture within the definition of manufacture as laid down under Section 2(l) of Central Excise Act, 1944. Therefore, on merit, the Appellant has no case. - Period of limitation - Held that:- appellant has meticulously maintained the Form V registers and filed D-3 intimation with the Department about receipt of the defective materials in their factory. Also, in the said register, it is mai .....

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mber (Judicial) For Appellant: Shri Anand Nainawati, Advocate For Respondent: Shri Sameer Chitkara, A.R. (Addl. Commissioner) ORDER Heard both sides and perused the records. 2. This is an appeal filed against OIA No.Commr(A)/183/VDR-II/2007, dt.30.08.2007, passed by Commissioner (Appeals), C.Ex. & S.Tax, Vadodara. 3. The brief facts of the case are that the Appellants are engaged in the manufacture of printed/un-printed cartoons, corrugated boxes (CFC) falling under Chapter 48 of Central Exc .....

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sued for recovery of CENVAT Credit of ₹ 9,17,691/- on the returned goods cleared as scrap with a proposal for imposition of penalty. On adjudication, the demand was confirmed and penalty of equal amount was imposed under Section 11AC of Central Excise Act, 1944. Aggrieved by the said order, the Appellants have preferred an appeal before the learned Commissioner (Appeals), who in turn, reduced the demand to ₹ 6,28,582/- and penalty of equal amount. Hence, the present appeal. 4. The le .....

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tained during the relevant period, where under they had meticulously made entries of the return goods invoice wise (sample copy of register enclosed at Pages 137 to 140 of the appeal paper book). Further, he submits that as and when they received the rejected material, necessary D-3 intimation was filed with the Department, informing about the receipt of the rejected material. Also, in said Form V register, the clearance of the rejected materials, invoice-wise, maintained. It is his contention t .....

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redit of duty paid goods in their factory when returned for remaking, refining and reconditioning or for any reason and utilisation of said credit in accordance with the CENVAT Credit Rules. It is also clear that in the event of process to which the returned goods are subjected, does not result into manufacture, then the Assessee is required to pay amount equal to the CENVAT Credit availed at the time of receipt of such defective goods. In the present case, converting the corrugated boxes into s .....

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ntity of such defective goods were remade/reconditioned and cleared on payment of appropriate duty. However, the major portion of the returned goods was scrapped and cleared from the factory after payment of duty on the transaction value of the scrap. It is the contention of the Department that the conversion of printed/unprinted corrugated boxes into scrap cannot be considered as a process of manufacture. Hence, the credit availed under Rule 16(1) is required to be reversed. I do not find any d .....

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paid as if such goods are received as inputs under the CENVAT Credit Rules, 2002 and utilise this credit according to the said rules. (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 .....

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ns as may be specified by the [Principal Commissioner or Commissioner, as the case may be]. 7. A plain reading of the said Rule make it clear that the process carried out on the returned defective goods, if does not result into manufacture, then the credit availed on the returned defective goods needs to be reversed. On the other hand, if the process results into manufacture, then the duty is required to be paid on the transaction value or the value arrived at under Section 4(a) of Central Excis .....

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als in their factory. Also, in the said register, it is maintained invoice-wise and clearance of scrap is also reflected. Also, in the monthly returns, the Appellant had indicated that the clearances of defective materials on payment of duty by making a remark as material resupplied against D-3 . Therefore, in my opinion, all the facts are disclosed to the Department. The Hon'ble Supreme Court in the case of Royal Enterprises (supra) referred to its earlier judgment, observed at Para 4 as fo .....

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