AVAILEMENT OF CENVAT CREDIT ON RETURNED GOODS

[SURYAKANT MITHBAVKAR]

We have received returned Goods (Partial) from our customer which were cleared in month of Nov-13 (Last Year) with payment of duty.

Our customer is not registered under C.Excise Act hence he is not able to issued returned invoice with effect of excise duty. He is given us our Transporter copy sent them at the time of clearance alongwith their debit note for returned goods.

The above case whether we are eligible to take cenvat credit on basis of our Transporter copy (where goods returned partial not full) if yes please give us procedure.

Secondly, As per new cenvat credit Act we can avail cenvat credit within six month from the date of invoice but our base invoice for taking cenvat credit is our Transporter Copy which is issued on Nov-13 (Last Year) whether cenvat credit is allowed in these case.

[Indian Commerce]

By S.Shanmugam

Hi,

As per the Rule 16 of Central Excise Rules, 2002, you are entitled to take the CENVAT Credit of the duty paid as if such goods are received as inputs. Further, to availCENVATCredit (re-credit) of this returned goods, the Excise Invoice you have sent originally is enough, when it has been properly endorsed by your customer.

However, as mentioned by you and as per the latest notification no.21/2014-CEdt.11th July 2014,CENVATCredit of Inputs and Input services are not eligible beyond six months from the date of issue.

Since, your Transporter copy of Excise Invoice was originally issued in Nov-13, in my opinion, it may not possible to availCENVATCredit of this returned goods.

regards

SS

[YAGAY andSUN]

Dear Suryakant,

In your query, you have not mentioned that when you had received the rejected goods from your customer on your own invoice as your customer was not registered under Central Excise Law? If you have received rejected goods recently then date of entrance the goods in your factory premises would be deemed date of issuance of invoice by your customer and you would be eligible for getting the CENVAT credit after following the Rule 16 provisions C.E. Laws.

Regards,

YAGAY and SUN

(Management, Business and Indirect Tax Consultants)

[Mahir S]

Sir,

You can avail the cenvat credit on your duplicate - transporter copy by endorsing thereon the quantity received back and preserving transporter's and debit note copy as well as gate register/ledger etc.

You have not mentioned the date of return of goods from the buyer's premises.

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. Hence, period of 6 months is to be counted from the date of rejection of the material ( In your case, from the date of transportation of rejected goods), and not from the date of clearance of goods which is in the month of November 2013.

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.

[Indian Commerce]

By S.Shanmugam,

As per the Notification No. 21/2014-CE,

“Provided also that the manufacturer or the provider of output service shall not take CENVAT credit after six months of the date of issue of any of the documents specified in sub- rule (1) of rule 9.”;

and Rule 9(1) of CCR, 2004 reads as

"9. Documents and accounts.-

(1) The CENVAT credit shall be taken by the manufacturer or the provider of output service or input service distributor, as the case may be, on the basis of any of the following documents, namely :-

(a) an invoice issued by-

(i) a manufacturer for clearance of -

(I) inputs or capital goods from his factory or depot or from the premises of the consignment agent of the said manufacturer or from any other premises from where the goods are sold by or on behalf of the said manufacturer;

(II) inputs or capital goods as such;

¹¹[(ii) an importer;

(iii) an importer from his depot or from the premises of the consignment agent of the said importer if the said depot or the premises, as the case may be, is registered in terms of the provisions of Central Excise Rules, 2002;]

(iv) a first stage dealer or a second stage dealer, as the case may be, in terms of the provisions of Central Excise Rules, 2002; or...."

According to his feedback, they have received the partial goods with their Transport copy (Excise Invoice) and no other prescribed (as per rule 9(1)) documents were issued by his customer, as they don't have a registration with CE dept. Hence, in my view, the date of issue of a valid document is must to avail the re-credit.

Dear Mr.Pradeep Khatri, could you please confirm the statutory provision available for your statement,

"thedate of entrance of the goods in your factory premises would be deemed date of issuance of invoice by your customer and you would be eligible for getting the CENVAT credit after following the Rule 16 provisions C.E. Laws."

-ss

[PAWAN KUMAR]

Dear Sir,

As per my view, re-credit of excise duty paid earlier is allow as per rule 16(1) of Central Excise Rules, 2002. The recent amendment in rule 4(1) of Cenvat Credit Rules, 2004 vide notification No.21/2014-CE(NT) shall not apply. Further you may seek guidanace from the board (CBEC) which allow re-credit of cenvat under Rule 4(7), Rule 3(5B) or Rule 4(5) (a) of CCR, 2004 by issuing circular No.990. You can send your observation to board that you are facing difficulty in certain cases.

[YAGAY andSUN]

Kind Attention :- Indian Commerce

Firstly, please check the article written by Mr. Madhukar N Hiregange in this regard in the articles section of this website. Also refer the replies submitted by Mr. Naveed as well as of Mr. Pawan Kumar's in this regard.

Secondly, in this matter, the customer is not registered with the Central Excise Department and had sent back the rejected material on the suppliers Invoice which is allowed as the Rule 16 that customer can issue it's own invoice or send the rejected material on the supplier's invoice. Therefore, the supplier's Invoice would be deemed as customer's invoice for rejecting the material. The date of rejection of material would be deemed as issuance of rejected invoice.

Further, there are two types of law (you must be aware) namely:-

1. Written Laws (Acts, Rules, Notification, Circulars, Clarifications, Trade Notices, Orders, Judgments etc.
2. Unwritten Laws (Understanding of subject matter, discussions, interpretation, and arguments etc.)

Written laws are so complex that the interpretation of law differs from person to person and in turn disputes are unavoidable. Disputes do settled in the Tribunals, Courts when both the interested parties discuss, apply their mind, interpret and start argue the complex matter. On the basis of facts, written and unwritten laws matter is decided to either interested parties. The above reply against which you are seeking explanation regarding statutory provision also duly falls under point no. 2 of the above after going through the settled legal positions as mentioned in the above point no.1.

So in our opinion CENVAT credit would be available to the assessee. You may also cross check with TRU.

Regards,

YAGAY and SUN

(Management, Business and Indirect Tax Consultants)

[Indian Commerce]

Dear Mr.Pradeep Khatri,

I do agree with your logic, but generally logics are not accepted by the department, they go only based on the "Acts, Rules, Notification, Circulars, Clarifications, Trade Notices, Orders", even judgements favouring to the assesses are still debatable.

Further, please refer the recent Circular No.990/14/2014-CX-8 dated. November 19, 2014,which reads (extracts) as follows,

"The Board has clarified that, the purpose of the amendment made by Notification No.21/2014-CE (NT) dated 11.07.2014 is to ensure that after the issue of a document under sub-rule (1) of Rule 9, credit is taken for the first time within six months of the issue of the document. Once this condition is met, the limitation has no further application. It is, therefore, clarified that in each of the three situations described in (1) Rule 4(7), (2) Rule 3(5B) or (3) Rule 4(5) (a) of CCR, 2004, the limitation of six months would apply when the credit is taken for the first time on an eligible document. It would not apply for taking re-credit of amount reversed, after meeting the conditions prescribed in these rules.”

Based on this circular the board has given clearance to avail re-credit for the above three situations only. Alternatively, if the board would have given clarifications to allow all the re-credits, then there may not be any problem.

Hence, as you mentioned, this issue can be referred to TRU for inclusion of this kind of situations, will only serve the purpose.

By

S.Shanmugam

AI Summary

Cenvat credit on returned goods depends on recognised documentary endorsement and the six month document limitation. Availability of CENVAT credit on returned goods turns on having a document recognised under the CENVAT rules (for example an endorsed supplier invoice or transporter copy) and compliance with the six month limitation for taking credit; preservation of transporter copy, debit note and gate records is essential. Administrative clarification states the six month restriction applies to taking credit for the first time on an eligible document, while certain re credit provisions remain treated as exceptions only where specifically referenced in the Board's circular.