By TIOL News Service

MUMBAI, MAY 24, 2018: THE appellant supplies transformers on short-term basis to their customers who may send back the purchased goods for reconditioning and repair and are thereafter removed under cover of excise invoices issued as per rule 11 of CER, 2002. On return of goods, the duty liability discharged at the time of clearance is taken as CENVAT credit.

The jurisdictional authorities have objected to this credit availment and accordingly CENVAT credit of Rs.3,28,369/- was denied and equivalent penalty has been imposed on the appellant for the period from December 2006 to May 2009.

The Commissioner(A) found nothing amiss in this order.

While upholding the order-in-original he observed –

'The wordings used in rule 16 of Central Excise Rules, 2002 "for any other reason" cannot be stretched to defeat the very purpose of intention of the said Rule. The said rule is a enabling provision to receive the goods, for repair purpose. Whereas in the present case goods are being received after temporary use by their clients and the same is not covered under rule 16 of Central Excise Rules, 2002.'

The appellant is before the CESTAT.

The Bench noted that the finding to the detriment of the appellant is based on presumption that 'appellant has twisted rule 16 to suit his convenience' and that these transformers returned from customers are not inputs or goods brought for repair or reconditioning and, hence, not eligible for availment of CENVAT credit.

The CESTAT considered the submissions and observed -

+ A wrong construction has been placed on the object and intention of rule 16 of CER, 2002.

+ It is not the intention of the statute that goods once taxed should be subject to repeated duty liability on every incident of removal. It is to provide a mechanism for such removal without repeating the duty burden that rule 16 of Central Excise Rules, 2002 carves a separate facility of adjustment of duty that is levied in the first instance.

+ Rule 16 is of such latitude that it covers, besides repairs and reconditioning, any other purpose. The expression in the statute cannot be allowed to be circumscribed on an unfounded interpretation by lower authorities to restrict this latitude.

Concluding that the findings of the lower appellate authority is not based on law, the order was set aside and the appeal was allowed.

(See 2018-TIOL-1608-CESTAT-MUM)