Goods rejected from our customer

[Asked by Guest]

Dear Experts,

Please resolve my query!!

We have supplied our Final product to our customer and our final product will be a part of a machinery for our customer . Our customer used our product and in manufacturing process They came to know some fault in our product and their one raw material , say X got attached with our product, say Y,. Now customer raised one invoice i.e. rejection invoice for our product because of some fault and raised one debit note of their another raw material which wasted because of our product and returned both material physically in our factory.

Now my question is our customer while raising debit note reversed cenvat credit or we can say charged some excise duty then what should we do whether we will take benefit of cenvat credit which our customer charged from us because this material we have never sent to our customer that why we can not say that this is our sale return ??

Please suggest, Thanks in advance.

AI Summary

Cenvat credit on returned goods permitted only if returned items are reusable in manufacture; scrap is ineligible.
Cenvat credit on excise duty paid for goods returned by a customer is allowable only if the returned finished goods can be recycled or used as inputs in the manufacture of a dutiable final product; scrap or waste not so usable is not eligible. An item newly received with the returned goods may be treated as a purchase and eligible for credit only where it undergoes a process conferring a distinct identity for use in manufacture. Claiming credit on a finished product and clearing it as scrap without meeting Rule 16 conditions and proper valuation records is not permissible.