M/S. SANKHLA INDUSTRIES UNIT III Vs. THE COMMISSIONER OF CENTRAL EXCISEBANGALORE-III COMMISSIONERATE

JUDGEMENT

(1.) THIS appeal of the assessee is directed against demand of duty of Rs. 4,76,052/ - arising out of denial of CENVAT credit to the assessee on their own final product returned by buyers during the period from April, 2006 to August, 2008. The appellant was engaged in the manufacture of PVC compound, PVC Master Batch and LDPE/HDPE compound during the material period. Several consignments of these products were returned by the buyers who found that the goods did not conform to their specifications. These clearances by the buyers to the assessee were made on payment of duty and under statutory invoices. CENVAT Credit of such duty was taken by the assessee under Rule 16 of the Central Excise Rules, 2002. These goods were reprocessed and the fresh products were also cleared on payment of duty at appropriate rate under Section 4 of the Central Excise Act. The dispute arose out of the department's view that the above process did not amount to manufacture and the contra view taken by the assessee.

(2.) AFTER examining the records and hearing both sides, I find that it is not in dispute that the goods returned by the assessee's buyers were remelted by making use of the same machinery and fresh products viz. PVC compound, PVC Master Batch, etc. emerged. It is also not in dispute that these products were cleared on payment of appropriate duty. In this factual matrix, the appellant could not have been asked to reverse the CENVAT credit availed on the returned goods. This is because the returned goods were subjected to the process of manufacture. As per Rule 16, as clarified in Chapter 18 of the Supplementary Instructions issued by CBEC, where the returned goods are subjected to a process amounting to manufacture, the manufacturer shall pay duty at the appropriate rate on the goods so manufactured, and for payment of such duty, the CENVAT credit of the duty paid on the returned goods could be utilized.