TMI Blog2017 (10) TMI 434X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant on their second clearances of tubes is in order and no additional amount of duty can be demanded from them. The appellant is not required to reverse Cenvat credit equal to availed the Cenvat credit on these returned goods - appeal allowed - decided in favor of appellant. - E/51006/2017-SM & E/51046/2017 - A/56731-56732/2017-SM[BR] - Dated:- 29-8-2017 - Mr. Ashok Jindal, Member (Judicial) Shri Manoj Chauhan, C.A. - for the appellant Shri Pardeep Juneja, A.R. - for the respondent ORDER Per: Ashok Jindal The appellants are in appeal against the impugned orders wherein the Cenvat credit availed under Rule 16(1) of Central Excise Rules 2002 was denied to the appellant. 2. The brief facts of the case are that the appellant is manufacturing files and rasps clearing the same to their sister unit on payment of duty. As sister unit did not find up to the mark returned the said files for removing the defect to the appellant. The appellant availed Cenvat credit in terms of Rule 16(1) of Central Excise Rules, 2002 and after testing when it is found that the defects cannot be removed and they cannot reused, therefore, the same were cleared on p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder 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. Revenue s contention is that the assessees should have paid the amount equal to the Cenvat credit taken at the time of receipt of the rejected goods in terms of first leg of sub-rule (2) of Rule 16. Whereas, the assessees contented that they have correctly paid the excise duty while removing the said goods and stated that they are covered under the second part of sub-rule (2) of Rule 16 under the term used any other case stated in the said subrule. We find that both sides sought to interpret the provisions of Rule 16 in their own way. The period of dispute is from 1.7.2001 to 30.6.2005 in the assessee s appeal and from July, 2007 to March, 2010 in the Revenue s appeals. Since the whole issue revolves on interpretation of Rule 16, the same is reproduced as under 16 Credit of duty on goods brought to the factory. (1) Where any goods on which duty has been paid at the time of removal thereof are subsequently returned to any factory for being re-made, refined, reconditioned or for any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory. After undertaking certain processes, in which waste and scrap were generated, the assessee cleared such waste and scrap on payment of duty at the rate applicable on the date of removal. The Tribunal found that the waste/scrap did not 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-cause notice admits these facts. The question is whether the second clearances of the goods would be covered by the first part of sub-rule (2) of Rule 16 as canvassed by the Revenue or by the second part of the sub-rule as contended by the assessee. In this context, it is pertinent to note that the goods returned by the original assignee were admittedly received by the assessee under sub-rule (1). They were received in the assessee s factory for being re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 by the Commissioner (Appeals). The appellate authority also recorded thus : The fact that the goods did not undergo any process amounting to manufacture is not in dispute. Having so found, the lower authorities have demanded reversal of the CENVAT credit on the premise that the first part of sub-rule (2) of Rule 16 covers second clearances of finished goods as such without undertaking any process. I have already held that such second clearances, as in the instant case, are also covered by the expression 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. CCE, Coimbato ..... X X X X Extracts X X X X X X X X Extracts X X X X
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