Cenvat credit -defective parts received back under warranty

This query is : Resolved

Aditya Subramanian (Querist)
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30 June 2015 Hi all,

Background
An entity is manufacturing capital goods and clearing it upon payment of duty and also offers a warranty policy for it.

Query 1:Is Cenvat Credit admissible under R16 when the defective parts of the capital good sold are received back into the factory and it is decided to clear them as scrap on payment of duty?

Query 2:Whether scrap sales not relating to manufacturing process(warranty rejects sold) are required to be shown separately under a tariff header in ER1 returns? If not how is non-process scrap disclosed in the return?

Please resolve my query.

Arun Kumar Singh

Arun Kumar Singh (Expert)
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30 June 2015 You can take the cenvat credit if goods return for repair under rule 16 of central excise rules 2002. The return goods are sold as a scrap then duty will be payable on the assessable value of the goods and classification of the scrap will be deferent from final products need to mention in the invoice.