Goods are sold to Customers under a cover of Invoice and Excise duty is paid on such invoice.
Subsequently the customer rejects the goods before using and processing and sent us (without under cover of Invoice)
The same is scrapped by the company as it is unfit and cannot be reprocessed.
Excise duty is paid on the transaction value of Scrap.
The issues here are:
Whether CENVAT credit can be availed on goods rejected by customer with or without under the cover of Invoice?
On reading Rule 16 of Central Excise rules 2002,it was implied that Credit can be availed only if the same is returned for bing repaired or refined or reconditioned or for other purposes.
25 December 2009
First of all please note that the scope of Rule 16 is very wide because this allows bringing back any goods on which duty has been paid to any factory. Means it is not necessary that the goods are returned in the same factory wherefrom the goods were dispatched on payment of duty.
It is true, the goods may be brought for the certain purposes which have been prescribed in the sub-rule (1) and (2). Acknowledging the practical problem, there is sub-rule (3) in which the manufacturer may receive back the duty paid goods. Here, the purposes have been mentioned for which the rejected goods may be brought back. These purposes are basically, the intention for bringing back as on after receiving back, the manufacture on due examination can know whether there is any possibility for re-made, re-conditioning to get finally okay goods. If these processes are done there is no problem but problem is that manufacturer finds no such kind of processes would be fruitful to make the goods okay and ultimately decided to scrap. In making scrap, no process involved. So in this situation the Commissioner may be approached in terms of sub-rule (3).
OR DEVIATING FROM THE STRICT CONSTRUCTION OF RULE 16, ADOPT ANY PRACTICAL APPROACH IN WHICH NO NEED TO APPROACH CENTRAL EXCISE AUTHORITIES.
For further query, feel free to write sanjayinfbd@yahoo.com (M-09350048731) or visit, HNO. 2489/8,Faridabad(Haryana)
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