Special procedure for removal of excisable goods for carrying out certain processes [Rule 16C] :

Rule 16C provides that the Commissioner may allow a manufacturer to remove excisable goods manufactured by him for carrying out test or any process not amounting t o manufacture to any other premises without payment of duty. The said other premises may be registered or unregistered. After such tests or any such other process are carried out, the Commissioner may allow-

(a) bringing back of such goods to the said factory without payment of duty, for subsequent clearance for home consumption or export, as the case may be, or

(b) removal of such goods from the said other premises, for home consumption on payment of duty leviable thereon or without payment of duty for export, as the case may be:

However, this rule shall not apply to the goods known as “prototypes” which are sent out for trial or development test.

In order to ensure uniformity in the conditions to be imposed by the Commissioner, it has been clarified vide Circular No. 844/02/2007-CX dated 31.01.2007 that the procedure prescribed under sub-rules (2),(3),(4) & (9) of rule 12AA of the Central Excise Rules, 2002
should broadly be followed in such cases. However, proper records of receipt of goods, its use, nature of activities carried out, goods processed and cleared by the said other premises should be maintained. Further, any waste/scrap arising at such other premises while carrying out the test/other processes should either be cleared on payment of duties or it should be returned back.

The Kerala High Court in case of Indian Aluminium Co Ltd v. CCE 2009 (233) E.L.T. 190 (Ker.), with regard to availment of credit on goods returned to factory for being re-made, refined or reconditioned, held that Sub-rules (1) and (2) of Rule 16 of Central Excise Rules, 2002 operate differently and therefore in order to avail Cenvat credit under sub-rule (1) there is no requirement for the manufacturer to clear the returned goods to same party who returned the goods.