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Cenvat credit utilised on the customer rejected goods...urge

This query is : Resolved 
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(Querist)
20 December 2012 Dear Experts,
Please clarify me on this issue.
Excise audit department has said to us that we have to pay back the cenvat credit utilised on the customer rejected goods as per Rule 18 of the Central Excise Rules 2002.
In other words
Rs. 10000 Cenvat Credit utilised for producing 100 units of Finished product on April 2012. Selling price per unit is 3000. Excise duty liability comes around Rs. 360 per unit (cess is also included).
All the goods were removed during the month of April 2012 itself. Out of 100 units 10 units were rejected by the Customers.
Now the excise audit department personnel says that we have to pay the excise duty of Rs.3600 (Rs.360 * 10 units rejected by the customres) which were utilised to product the customer rejected products as per Rule 18 of the Central Excise Rules.

Please clarify me whether i am required to pay this Rs.3600. Give supporting answers with relevant sections, rules or notification or case laws as the case may be.

Thanks & Regards,
Rajesh.
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Arun Kumar Singh

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Arun Kumar Singh (Expert)
20 December 2012 May I know that what is the products?
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