GOODS RETURNED

[SURYAKANT MITHBAVKAR]

We are manufacturing Pharmaceuticals machinery registered under Central Excise Act.

We have received machine returned from our customer. The same machine earlier supplied by us in the year 2003.The customer has issued us transfer invoice showing removal of Capital Goods as it is under Rule 3 Sub Rule '5' and reversed credit as per Not. No. 39/2007-CE(NT) Dated 13.11.07.

In view of the above please clarify the following point.

Since the machine is too old we are not able to do rework in the same machine and to sell the other customer. Can we dismentle and used the same parts to manufacturing our other machine wherein not possible to produce identification of parts used in different machine to the department. In short we will take credit as our input.

Pl. advice.

[Mahir S]

Sir,

the goods recd for repairs and reconditioned are required to be returned back. herein the machinery is not been returned back, hence credit shall not be eligible.

secondly, if cleared as such by the customer to you and now required to be dismantled in your factory premises, then cenvat not available to you as only few parts shall be used in your factory premises and that too old and used parts.

thirdly, the customer cannot clear the machinery as such to you, after use of machinery for so many years and after claiming depreciation thereon.

[YAGAY andSUN]

Dear Surya,

We are in agreement with the reply submitted by Mr. Naveed.

Regards,

SameerMalhotra - Consultant

(YAGAY and SUN) - Management, Business and Indirect Tax Consultants

[Kadayam Ganapathy Subramanian]

Dear Sirs,

Today a decision is reported in TaxTMI - Home and the same is extracted below:

2015 (1) TMI 1040 - CESTAT NEW DELHI

M/s. Hotline CPT Ltd. Versus Commissioner of Central Excise Indore

Cenvat credit - Colour Picture Tubes (CPT) are cleared on payment of duty - Re-manufacture and re-making of tubes - Held that:- Defective CPTs, which had earlier been cleared on payment of duty, had been received back in the factory for being re-made in the terms of the provisions of Rule 16 of the Central Excise Rules, 2002. From the records, it is clear that the defective CPTs received back had been dismantled and thereafter by using salvaged parts and fresh parts, the entire process of manufacturing is undertaken on the same production line. The fresh CPTs made had been cleared on payment of duty. Under the provisions of Rule 16 of the Central Excise Rules, 2002, when duty paid goods are returned to the factory of manufacture, for being repaired, remade, refined, reconditioned, etc., the manufacturer take the cenvat credit of the duty originally paid and thereafter in terms of provisions of sub-rule (2), at the time of clearance of the repaired/remade goods, if the process undertaken does not amount to manufacture, he is required to pay the duty amount equal to the cenvat credit taken, but if the process amounts to manufacture, he is required to pay the duty chargeable on the goods at the rate applicable on the date of removal and on the value determined under the provisions of Section 3(2), Section 4 or Section 4 A, as the case may be. There is no provisions in Rule 16 that Cenvat credit in respect of the inputs used in the process of repairing/refining would not be available.

Appellant had disclosed the process undertaken by them as early as in the month of May, 2001 in respect of the defective CPTs received from their customers and hence, the department cannot allege suppression of facts saying that the appellant had not disclosed that they were taking Cenvat credit on the inputs used in re-making of the goods. In view of this, there is merit in the appellant plea. In these circumstances, I hold that the appellant has correctly availed the Cenvat credit on input and the same cannot be denied - Decided in favour of assessee.

AI Summary

Pharma Machine Return: Credit Denied for Parts Dismantling Under Rule 3(5); Case Suggests Re-manufacture Eligibility A company manufacturing pharmaceutical machinery under the Central Excise Act received a returned machine from a customer, originally supplied in 2003. The customer issued a transfer invoice under Rule 3, Sub Rule 5, reversing credit per Notification No. 39/2007-CE(NT). The company inquired if it could dismantle the machine and use the parts for other machines, despite being unable to identify parts for tax purposes. Replies indicated that credit would not be eligible as the machine was not returned for repair, and the customer could not clear the machine after years of use and depreciation. A cited legal case supported credit eligibility for re-manufactured goods, suggesting potential applicability to the company's situation.