ORDER
T.K. Jayaraman, Member (T)
1. The stay application and appeal have been filed against Order-in-Appeal No. 93/2006, dated 27-3-2006 passed by Commissioner of Central Excise (Appeals), Mangalore.
2. The appellants availed Cenvat credit to the tune of Rs. 25,765/- in respect of rejected goods received back for repair and rectification. The appellants had scraped the goods without carrying out any process amounting to manufacture. Revenue proceeded against the appellants under Rule 16 of Central Excise Rules, 2002 for reversal of the Cenvat credit along with interest. The Adjudicating Authority confirmed the demand and imposed equal penalty. Interest was also demanded. The appellants appealed to the Commissioner (A). The Commissioner (A) rejected the appeal and upheld the Order-in-Original. Aggrieved over the OIA, the appellants have come before this Tribunal for relief.
3. Shri S.R. Savant, learned Advocate appeared for the appellants and Shri Anil Kumar, learned ]DR for the Revenue.
4. The learned Advocate said that even though they carried out the process of manufacture, the material turned to waste and therefore, the credit should not be denied to them.
5. The learned JDR said that as per Rules if no process amounting to manufacture is carried out in respect of the rejected goods, the appellants are not entitled for the Cenvat credit on the rejected goods.
6. I have gone through the records of the case carefully. Rule 16 of the Central Excise Rules deals with taking of credit of duty on the goods returned to the factory. Normally, an assessee removes the finished products on payment of duty to the customers. If for some reason, the customer rejects the goods, they arc returned to the factory for remaking, refining, reconditioning or any other process. In such circumstances, the duty originally paid on the removal of the finished products can be taken as Cenvat credit on their receipt. However, if the goods are subjected to some process, which does not amount to manufacture, the manufacturer shall pay an amount equal to the Cenvat credit taken on their receipts. In the present case, the entire goods received have become scrap. Therefore, the contention of the appellant that they subjected the returned goods to a process amounting to manufacture is not acceptable. Therefore, the impugned order of the Commissioner (A) is correct. However, having regard to (he facts and circumstances of the case, the penalty is reduced to Rs. 1000/- (Rupees One Thousand only). The stay and appeal is disposed of on the above terms.
(Operative portion of this Order was pronounced in open court on conclusion of hearing)