Dear All,
Please resolve my following query?
B Ltd. is a manufacturer of personal and home care products for which it requires Raw Material Labsa 90%. For the said requirement, it approached A Ltd. to provide the same.
Being a manufacturer, A Ltd. sold 40MT 90% Labsa (FG) to B Limited as per terms agreed. However at the time of quality inspection at the Factory Gate of B Ltd. it was found that the purity matter is 86% only.
Now B Ltd. issues Debit Note to A Ltd. on the basis of Less Quality received. B Ltd. has the point that its input-output ratio shall get change (effectively output will get down) because of receiving lesser active matter i.e. less purity or less quality.
Q. 1 Is B Ltd.justified as per law?
Q. 2 Can B Ltd. reverse Cenvat due receiving of less active matter?
Q. 3. If the answer of above two is yes, Can A Ltd. take credit of Cenvat on account of reversal of Cenvat Credit by B Ltd. through Debit Note.
What will be its other consequences? Please also share any high court decision regarding the same case.
Regards,
Nandan Singh Thakur
CAclubindia
