Purchase return to to SSI

[Pradeep Jain]

Dear Sir,

We are registered under Central Excise and getting same inputs from companies registered under central excise and SSI unit also , who are availing SSI Excise Exemption and no ED is charged by SSI . Further we do not maintain separate account for duty paid goods and goods supplied by SSI without charging ED.

At the time of purchase return of inputs we are doing reversal of ED on the goods supplied by unit registered under Excise. and not charging ED on the purchase return to SSI units because no duty was charged by SSI unit at the supply of goods to our Company.

I seek your view about the above mentioned system.

Regards

Pradeep Jain

[KASTURI SETHI]

Sh.Pradeep Jain Ji,

I am of the view you are NOT on right track. As per latest Cenvat Credit Rules,If you have taken credit you will have to pay interest up to the period of purchase return of inputs.There is no one-to-one co-relation. No doubt there isa judgement of Hon'ble Supreme Court that if Credit reversed before utilization, it means credit not taken.This judgement becomes irrelevant in view of latest amended Cenvat Credit Rules.

[Rajagopalan Ranganathan]

Sir,

The method adopted by you is the correct one.

[JSW CEMENTLIMITED]

I do not agree with the views expressed by Mr. Kasturi as because the provisions of the Cenvat Credit rules which Mr. Kasturi is referring to is with regards wrong availment of cenvat credit that is cenvat credit availed on in-eligible items or excess credit availed than what has accrued. That provisions should not be made applicable to the case of purchase return, because at the time of receipt of goods, it was meant only for the purpose of manufacturing operation but due to some or other issue like quality problem etc., the material got rejected and were returned as purchase return, this situation cannot be construed as wrong availment. Under the situation, the cenvat credit availed has to be reversed which is being done by Mr. Jain and he is following the correct procedure only.

[KASTURI SETHI]

Kind attention : Sh.Pradeep Jain

Better option is to inform the jurisdictional Range Officer about the practice of reversal of cenvat credit on inputs returned as defective so as to avoid legal implications. Moreover, such intimation would prove your bona fides.There is no harm in informing the Range Officer. We cannot interpret the meaning of the words ,"wrongly taken' in our own way. Rest as u like.

AI Summary

Cenvat credit reversal on purchase returns may trigger interest liability under amended rules, while practice remains disputed. Issue: whether reversal of Cenvat credit and payment of interest is required when inputs are returned to SSI suppliers who did not charge excise duty. One position treats credit taken as attracting interest until reversal under the amended Cenvat Credit Rules; an alternate position treats returns of defective inputs as proper reversals without constituting wrongful availment or attracting interest. Parties are advised to inform the jurisdictional range officer of the practice to evidence bona fides and mitigate dispute.