reversal of cenvat credit

[VENKAT S]

A manufacturer imported an item which he uses in manufacture as raw material. If he issues that material to customer as replacement(under warranty), should the manufacturer reverse the cenvat credit availed?

[Ganeshan Kalyani]

Sir, the input credit is eligible if it is used in or in relation to manufacturing of Dutiable goods. In your case you have not used it in manufacturing process instead have removed it as it is. Hence the condition of input tax credit is not satisfied and therefore you are not eligible for input credit. Now that you have taken the credit you need to reverse the same. This is my view. Thanks.

[KASTURI SETHI]

I concur with the views of Sh.Ganeshan Kalyani, Sir. It is a case of replacement though under warranty period. Goods are not available in the ;why cenvat credit against those goods (inputs) should stand in cenvat credit account. Amount should be reversed and may be taken again the after receipt of the replaced goods.

[VENKAT S]

Thankyou verymuch for your kind replies Ganeshan sir and Kasturi ji.

AI Summary

Cenvat credit reversal required when imported inputs are supplied as warranty replacements, reclaimable if later used in manufacture.
A manufacturer must reverse cenvat credit when an imported input, though availed as credit, is not used in the manufacture of dutiable goods but is supplied as a warranty replacement; credit is tied to use in or in relation to manufacture, and may be reclaimed if replacement goods are later received and used.