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CUSTOM EXCISE & SERVICE TAX APPELLATE TRIBUNAL, MADRAS
MS. JYOTI BALASUNDARAM, VICE-PRESIDENT
Lakshmi Ring Travellers (CBE) Ltd. -Appellant
Versus
Commissioner of Central Excise -Respondent
FINAL ORDER NO. 828 OF 2010 APPEAL NO. E/608 OF 2009
Decided On : 30-07-2010
S. Kandasamy,Ms. Indira Sisupal
1. The assessees herein who are manufacturers of textile machinery parts sent cenvat-credited raw materials/inputs/semi-finished goods to certain job workers by following prescribed procedure. Certain inputs were put into the stream of manufacture by the job workers but found to be defective and hence were returned to the assessees as they could not be used further for the manufacture of final products. The assessees raised debit notes on the job workers for the loss incurred due to the fault of the job workers. Show-cause notice dated 18-4-2007 was issued proposing recovery of Rs. 52,268 being the amount equivalent to CENVAT credit on the raw material and raw material contained in the finished goods, together with interest, by applying the extended period of limitation, and also proposing imposition of penalty. The notice was adjudicated by the Assistant Commissioner who confirm the demand together with interest and impose penalty of equal amount, his order was upheld by the Commissioner (Appeals); hence this appeal.
2. I have heard both sides. There is no dispute that the inputs became damaged or defective during process. The CENVAT Credit Rules do not contain any provision for reversal of credit if inputs get damaged in the course of manufacturing process. The question of reversal of credit arises only if the inputs became defective even before put to use. In these circumstances, the fact that the assessees collected an amount from the job workers by raising debit note to the extent of loss occurred, cannot be a ground for demanding reversal of credit. In this view of the matter, I set aside the impugned order and allow the appeal.
