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Cenvat credit on rejected finished goods

VINODH N T (SENIOR MANAGER FINANCE) (47 Points)

23 May 2013

I am working in a Foundry industry where we supply Iron Castings to various customers. we receive various rejections from the customers. Such rejections will come in invoice and relevant excise duties are specified. The rejected castings received will be melted in our furnace. We take the cenvat credit for such rejected castings.

Central Excise is objecting stating that the Castings received are finished goods and no credit must be taken. However we are of the view that the same is used as input material credit must be allowed.

Your views pls

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3 Replies

Arun Kumar Singh (GST Advocate) (15220 Points)
Replied 24 May 2013

The cenvat credit shall be allowed if any inputs or capital goods return to the factory as such.

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Z ( ) (2965 Points)
Replied 24 May 2013

Your view is correct. Show them

Rule 16 of Central Excise Rules 2002

"RULE 16. Credit of duty on goods brought to the factory. — (1) Where any goods on which duty had been paid at the time of removal thereof are brought to any factory for being re-made, refined, re-conditioned or for any other reason, the assessee shall state the particulars of such receipt in his records and shall be entitled to take CENVAT credit of the duty paid as if such goods are received as inputs under the CENVAT Credit Rules, 2002 and utilise this credit according to the said rules.

(2) If the process to which the goods are subjected before being removed does not amount to manufacture, the manufacturer shall pay an amount equal to the CENVAT credit taken under sub-rule (1) and in any other case the manufacturer shall pay duty on goods received under sub-rule (1) at the rate applicable on the date of removal and on the value determined under sub-section (2) of section 3 or section 4 or section 4A of the Act, as the case may be.

[Explanation. - The amount paid under this sub-rule shall be allowed as CENVAT credit as if it was a duty paid by the manufacturer who removes the goods.]

(3) If there is any difficulty in following the provisions of sub-rule (1) and sub-rule (2), the assessee may receive the goods for being re-made, refined, re-conditioned or for any other reason and may remove the goods subsequently subject to such conditions as may be specified by the Commissioner."

R P Ananthakumar (Sr. Officer - Central Excise/Cash) (514 Points)
Replied 30 May 2013

If the goods are returned for rework/repair/reprocess, you can avail the cenvat benefit. In that case you have to maintain separate register and cleared the same after recification with payment of duty.

If you have received rejection goods, you can not able to avail the cenvat benefit.