CENVAT CREDIT IN CASE OF RETURN OF CONSIGNMENT GOODS

[Prashant Agarwal]

I AM AN IMPORTER OF PLASTIC RAW MATERIALS AND HAVE ASSIGNED A CONSIGNEE AGENT IN OTHER STATES. BELOW IS THE CASE WHEREIN I URGENTLY NEED YOUR HELP

IN CASE WHERE PARTY A SENDS THE GOODS TO PARTY B UNDER A CONSIGNMENT AGREEMENT AND PARTY B SELLS THE GOODS TO PARTY C WHO THEN REJECTS THE GOODS AND RETURNS THE SAME TO PARTY B. CAN PARTY B RESEND THE GOODS BACK TO PARTY A AND REVERSE THE EXCISE DUTY THEREIN ??? IF YES THEN WHAT PROCEDURE IS TO BE FOLLOWED

PLEASE REPLY

[CSSANJAY MALHOTRA]

Dear Prashant,

Please note that Central Excise Rules & CENVAT Credit Rules are different and are independently applicable.

Rule 16 of Central Excise Rules provides for treating the sales return as “Deemed Input” for the purpose of availing CENVAT & Rule 4 of CENVAT Credit Rules provides the admissibility of CENVAT Credit on Inputs used in the manufacture of final products.

• Going by the provisions of Rule 16 of Central Excise Rules, No Time Limit is prescribed under Rule 16 of Central Excise Rules 2002 for taking back Sales Return and further Rule 4 of CENVAT Credit Rules for time limit restriction has no correlation with Rule 16 of CER, hence the provisions of Rule 4 of CCR should not come in any way for time limit restriction legally for CENVAT availment.

 

You can take back Sales Returns from your consignment agent and accordingly avail the CENVAT benefit on the strength of Your Original Excise invoice (Document specified in Rule 9 (1) of CCR 2004 for CENVAT availment). Please do ensure that the Particulars stated on original invoice raised for clearing goods to Consignment agent should match with the sales return goods particulars.

 

 

 

[Prashant Agarwal]

A great help indeed .. Many thanks Sanjay ji

[KASTURI SETHI]

Sh.Sanjay Malhotra Ji,

Really par excellence reply.

[DR.MARIAPPAN GOVINDARAJAN]

Very good knowledge enriching information.

[CSSANJAY MALHOTRA]

Thanks to my seniors Mr.Kasturi and Mr. Govindarajan ji.

[YAGAY and SUN]

Dear All,

Please go through the Rule 16 (1) & (2) again meticulously. The query raised is not so simple as answered or as it seems. In our view Rule 16 (3) would be applicable and permission from the Principal Commissioner or Commissioner, (as the case may be) would also be required since in this matter there is no manufacturer or factory involved but importer and Rule 16 (1) & (2) says Factory/manufacturing etc.

In NCL Secolar Ltd.v CCE 2005 2004 (10) TMI 404 - CESTAT, BANGALORE it was held that procedure under Rule 16 applies only when goods are received in the factory. The procedure does not apply when goods are returned to office outside the factory and dispatched from there.

Please check for the sake of right interpretation of Rule 16. 

Regards,

YAGAY and SUN

(Management, Business and Indirect Tax Consultants)

[Mahir S]

Sir,

The point raised above is legal and correct and needs to be understood at the time of return of goods.

However, i assume that the query here is basically related to manufacturing activity and therefore the reply provided by Sanjayji appears to be perfect.

If the query is not related to manufacturing activity, then rule 16 shall not come into picture, as clearly pointed out above by YAGAY AND SUN.

AI Summary

CENVAT credit on sales returns available if Rule16 procedures and original excise invoice requirements are satisfied; factory receipt may matter.
CENVAT credit can be claimed on consignment sales returns treated as a deemed input under Rule 16 of the Central Excise Rules, which prescribes no time limit for taking back sales returns; Rule 4 of the CENVAT Credit Rules does not curtail this availment. Claim must be supported by the original excise invoice specified in Rule 9(1) of the CENVAT Credit Rules and matching particulars. If returned goods are not received in a factory, Rule 16 may not apply and Rule 16(3) and Commissioner permission could become relevant.