Cenvat Credit On Rejected Return Goods

[Asked by Guest]

dear sir

we are plastic film manufacturer / exporter.

now my question is..........

we are sales finish goods to our customer with payment of duty,in the some cases part or whole material rejected by customer.

same material received in our factory with excise invoice issued by customer or our own invoice and same material quantity we credited in our RG-1 Register and cenvat credited in our RG-23-A-PART-II register as a credit.

now our quality person check this material and suppose material is not usable or reparable then we are convert in to scrap or waste.and sales this material as a scrap with payment of duty.

at the time of return goods we credit cenvat ₹ 1000/- for example

at the time of scrap sales we paid duty on scrap value ₹ 450/-

so please ask me about balance cenvat credit ₹ 550/- is reverse or not.

all material is PRINTED FORM.

we are waiting a valuable reply.

thanking u in advance.

[Rajagopalan Ranganathan]

Sir,

Since the returned material is found to be unfit for sale or for reprocessing and sold as scrap you have to reverse the entire credit of ₹ 1,000/- taken since scrapping is not a process of manufacture. Only when the returned goods are suject ro a process amount to manufacture , you can clear the resultant product on transaction value. Otherwise you have reverse the credit taken on the returned goods.

[Mahir S]

Yes sir, in your case cenvat credit of total ₹ 1000/- is required to be reversed, as explained above.

It would be advisable to first verify whether the returned goods can be re-processed or not.

AI Summary

Cenvat credit reversal required when returned goods are scrapped; full credit must be reversed absent reprocessing into manufacture.
If returned goods are unusable and converted into scrap, scrapping is not a process of manufacture and any input credit taken on the returned goods must be reversed in full; payment of duty on the scrap sale does not permit retention of residual credit unless the returned goods are subjected to a process amounting to manufacture enabling clearance on transaction value.