Cenvat credit is available on invoices issued by their own depot.

PJ/Case Laws/2012-13/1223

Case: -DHARMPAL SATYAPAL LTD. V/S COMMISSIONER OF CENTRAL EXCISE, NOIDA

Citation: - 2010(261) E.L.T. 372 (Tri.-Del.)

Issue:- Cenvat credit is available on invoices issued by their own depot.
Brief Facts: - The appellant has more than one factory at different locations and has several depots for the purpose of selling their products. The applicant, in particular, has a factory at NOIDA and they have received the goods originally manufactured by them and also goods manufactured by other units of the company for the purpose of reconditioning, repairing etc. under Rule 16 of the Central Excise Rules, 2002. They took credit of duty originally paid by the NOIDA unit or the other unit as a case may be. They undertook the processes and thereafter paid the duty and cleared them to the market. The department issued notice alleging that the credit taken under Rule 16 of the Central Excise Rules was not supported by “admissible documents”. The original, authority confirmed demand of duty of Rs. 3,41,223/- along with interest and imposed equal amount as penalty. The Commissioner (Appeals) has upheld the order of the original authority.

Appellant’s Contention: - The appellant argued that Rule 16 of the Central Excise Rules, 2002 is a facility to bring goods cleared earlier on payment of duty either by the same manufacturer or goods cleared by other manufacturers for the purpose of being re-made, refined and re-conditioned. For the purpose of implementing the said facility, Rule 16 provides for taking credit of duty originally paid on the goods treating them as if “inputs”. However, this facility is basically independent of the procedural rigour of the Cenvat Credit Rules. The main condition is that the goods brought should have been duty paid and after processing the said goods should be cleared on payment of duty.
He further submits that the findings of the Commissioner (Appeals) that depot from which the goods were returned under Rule 16 of the Central Excise Rules are not registered depots and therefore, they cannot issue invoices and also the finding the provision relating to the invoices issued by original manufacturer under Rule 11 of the Central Excise Rules, 2002 should be applicable for receipt under Rule 16 for returned goods are not legally correct.

Respondent’s Contention: - The respondent submits that the documents under which the goods were received by the factory were for transfer of the goods and no sale documents of the depot to various dealers indicating the duty involved has been produced by the applicants.

Reasoning of Judgment: - The CESTAT held that Rule 16 of the Central Excise Rules, 2002 provides the facility which is different from the Cenvat Credit Rules applicable for inputs. The goods received for the purpose of reconditioning, repairing, remaking cannot be treated as “inputs”. It is by a deeming fiction the same are treated as if inputs and the duty originally paid either by the manufacturer who actually manufactured and cleared the goods is being permitted to be taken as credit. The condition is that after the goods are subjected to processes envisaged under Rule 16, they should be cleared on payment of duty. Prima facie, the ground on which the Commissioner (Appeals) has rejected the appeal do not hold good. Rule 11 of the Central Excise Rules, 2002 has no application to goods returned under Rule 16. The documents on record indicate invoices issued for depot on transfer basis on which the respective manufacturing units have paid the duty. The applicant have duly intimated the arrival of goods for the purpose mentioned under Rule 16 and also submitted the original duty paying documents of the manufacturing units.
Hence they held that the applicant has made out a case for total waiver of dues as per the impugned order and, accordingly, they ordered for waiver of pre-deposit of the dues and stay recovery thereof till disposal of the appeal.

Decision: - Stay granted.

Comment:- This is very important decision from the point of view that the department raises objection in audit that the credit cannot be taken on the basis of own invoice. When the manufacturer is producing consumer goods and buyer is not taking the credit then the goods are returned on his own invoice and the same thing happen in case of goods return from depot. The only requirement of Rule is that the goods should be duty paid and there is no doubt about the same. The credit is admissible on the basis of own invoice and ratio of this decision also underlines the same.

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PJ/Case Laws/2012-13/1223

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