Cenvat credit on returned goods after 6 months.

[G GOSWAMI]

Ref.Notification No. 21/2014-CE(NT) w.e.f 01.9.2014. I shall be highly obliged to have your kind opinion in the following matter.

In many cases we receive return goods under Rule 16 of CE Rules 2002 for repair/reprocess/ further despatch/any other reasons from our customer,transporter's godown beyond six months covering our own invoice through which duty had been paid for their initial despatch and we avail cenvat credit on them without dispute.Whether there will be any problem to avail cenvat credit after 01.9.2014 as per the said notification or how the cenvat credit could be availed after 01.9.2014 under the aforementioned situations.

Regards,

G.GOSWAMI

[YAGAY andSUN]

Dear G Goswami,

Rule 16 nowhere prescribes that goods must be returned within six months from the date of its' removal. However, you may have some issues with the West Bengal VAT provisions as under the VAT laws, the time limit of 6 months has been prescribed, for rejecting/ returning the goods by the buyer to the seller from the date of removal of goods by the seller.

Goods can be returned by the buyer either on the basis of seller's invoice or its own invoice depending of the quantity of rejected material. If the entire lot is being rejected then buyer can return the goods on the seller's invoice along with reason in writing for such rejection and if part of material is being rejected then buyer can issue it's own invoice.

The period of limitation as mentioned in the Notification No. 21/2014-CE(NT) will start from the date of rejection of goods by the buyer to seller. CENVAT credit without any difficulty can be availed as per the provisions of Rule 16 read with CENVAT credit Rules, 2004 as amended from time to time.

Regards

Team YAGAY and SUN

(Management and Indirect Tax Consultants)

[Mahir S]

Yes, cenvat credit can be availed on such invoices after 01.09.2014, provided credit is availed in 6 months time period from date of issue of the repaired goods invoice by your customer.

[Rajagopalan Ranganathan]

Sir,

If the buyer is registered under Central Excise Act he would have taken the credit on receipt of the inputs into his factory. He can return the defective goods under his invoice indicating the duty paid on such rejected/defective goods. In this case there is no problem to avail the credit.

If the while lot was rejected due to some defect again if the buyer is registered under Central Excise Act, 1944, he would have taken the credit of the duty paid in his CENVAT Account when the inputs are received into his factory. When after inspection by Quality Control Department of the buyer if the inputs are found to be defective the buyer can return the defective inputs under his own invoice after reversing the credit already taken. In this case also there will be no difficulty to take the credit of duty paid on the returned inputs.

Only in the case where buyer refuse to receive the inputs from the transporter and the transporter return the inputs to the supplier as undelivered the supplier of the inputs cannot take credit provided the inputs are returned after six month from the date of invoice of the supplier. The only way available is to seek the permission from the Commissioner of Central Excise under rule 16 (3) of Central Excise rules, 2002. However I am not optimistic that you will get any relief from the Commissioner since he will say provisions of general rules Rule 16 of Central Excise Rules, 2002) cannot override the provisions of specific provisions (Cenvat Credit Rules, 2004) and hence he cannot go beyond the statute and cannot given any relief. The only way available to you is to represent the matter to Government of India in Ministry of Finance, Department of Revenue, New Delhi to provide you relief in this matter.

AI Summary

Cenvat credit on returned goods depends on rejection date and timely invoices; delayed transporter returns raise relief issues. Cenvat credit on returned goods is governed by Rule 16 and Notification No. 21/2014-CE(NT); the limitation period for claiming credit runs from the date the buyer rejects the goods, and credit is allowable when returned goods and invoices comply with the CENVAT Credit Rules. If goods are returned undelivered by the transporter after more than six months from the supplier's invoice, the supplier may not be able to take credit unless relief is obtained under Rule 16(3) or from revenue authorities.