Cenvat Credit against rejected imported packing material.

[Samik Chaudhuri]

I would like to know can we take cenvat credit (CVD +Import Duty)against rejected imported packing material? We are not interested to send back the material. Please confirm me.

With thanks

Samik Chaudhuri

[Rajagopalan Ranganathan]

My dear Chaudhuri,

Credit of CVD and SAD paid on imported materials can be availed only when the same are received in your factory and used in or in relation to manufacture of dutiable final products. I you are rejecting the same prior to receiving into your factory then credit cannot be availed by you. If the same is rejected due to quality etc., after receipt into your factory and credit is already taken, then you have to reverse the credit taken if the rejected material is not chargeable to duty under Central Excise Tariff Act, 1985 or if it is dutiable then the credit can be utilized for payment of duty on the rejected material. But there is a rider. the department will require you to reverse the credit on the ground that the credit availed is more than the duty paid on the imported goods. Atleast they will ask you to pay back the difference between the credit taken and duty paid on the rejected material.

AI Summary

Cenvat credit on imported packing material allowed only if received and used; otherwise credit must be reversed. Cenvat credit of CVD and SAD on imported packing material is allowable only when the material is received in the factory and used in or in relation to manufacture of dutiable final products. If rejected prior to receipt, credit cannot be availed. If rejected after receipt and credit taken, the credit must be reversed when the rejected material is not chargeable to excise duty; if dutiable, the credit may be used to pay duty on the rejected material, subject to departmental adjustment where credit exceeds duty payable.