Scrap materials in Factory

[Asked by Guest]

We are purchasing material in factory after duty paid. Same materials is rejected before production. Reason could be rusty, handling damage etc. Can we pay the excise duty on this scrap?

Vise versa if used in production and while making product materials rejected then can we pay the excise duty and how much.

In which excise rule it is mentioned.

Thanks,

Vinayak.

[YAGAY and SUN]

Dear Vinayak,

You would have to reverse the CENVAT credit equivalent to the CENVAT credit availed on such materials.

Regards

YAGAY & SUN

(Management, Business & Indirect Tax Consultants)

[Ajay Raghatate]

Dear Sir,

What will be the Duty liability , if we removed input as scrap ,

On transaction value or proportionate cenvat credit availed

Thanks

AI Summary

CENVAT credit reversal required when inputs become scrap, with duty valuation depending on transaction value or proportionate credit basis.
Where inputs become scrap before or during production, the manufacturer must reverse the CENVAT credit equal to the credit availed on those inputs; a related question is whether duty on removed inputs should be measured by the scrap's transaction value or by a proportionate share of the CENVAT credit availed.