Assessee taking credit on rejected goods, recyling same and paying duty on clearance – alleging that credit has been availed irregularly is unsubstantiated – no question of double duty : CESTAT

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THE assessee had received sales rejections from their customers [Ch 39 & 63 of CETA, 1985] and the same were scrapped. Since the rejected goods were not reprocessed as required under Rule 16 of CER, 2002, demand was raised for irregularly availed CENVAT credit.

The demand was confirmed and penalty was imposed u/r 15(2) of CCR, 2004.

Hence the present appeal.

It is submitted that the rejected goods were reused and recycled and duty was paid thereon; that duty being demanded in the impugned proceedings amounts to double duty.

Moreover, the Commissioner (A), without any verification of records or by any investigation report has wrongly come to the conclusion that the rejected goods on which CENVAT credit was availed were scrap and new fresh goods were cleared which has nothing to do with the returned goods and there is no process undertaken on such returned goods and consequently held that the assessee has irregularly availed credit.

After considering the submissions, the CESTAT inter alia observed –

Demand has been confirmed on the basis of assumptions and presumptions and by taking the average of the last 5 years.

No investigation was conducted by Department and there is no allegation that assessee has removed the rejected goods as such.

Commissioner (A) has not considered the instructions issued by Board vide F.No. 267/44/2009 dt. 25/11/2009 and also decision relied upon.

It is found that assessee being a manufacturer is paying duty on clearances effected by recycling rejected goods and if assessee is asked to pay the duty on rejected goods once again, then it amounts to double duty.

Holding that the order is not sustainable, same was set aside and appeal was allowed.

Citation:  2018-TIOL-1260-CESTAT-BANG