NN 20/2016_Exempted goods Solar pump_Cenvat Credit

[Varun Arora]

Dear Experts,

We manufactures a component of submersible pump(Machine) and In notification 12/2012 One product is covered i.e. Solar Submersible pump i.e. our customer can procures Raw Material without paying duty, in List 8 And our customer is following NN 20/2016 and directs us not to add duty.

Now my question is our yield is 60% and scrap is 40% for generating 100 60 kg final product we have to procure Raw Material i.e. Electrical sheet 100 kg Now If we supplies 60 kg to our customer then first of all whether cenvat credit need to be reversed or not and secondly whether we need to reverse Cenvat credit proportionately on 60 kg of raw material or 100 kg of raw material because scrap value is not so high.

Please suggest , waiting for your valuable suggestions.

[Ganeshan Kalyani]

Sir, are you paying excise duty on the scrap removed. Thanks.

[KASTURI SETHI]

Dear Sir,

Solution to your problem lies in Rule 6(6)(iva) of Cenvat Credit Rules, 2004. Pl. go through it.

[Rajagopalan Ranganathan]

Sir,

You have mentioned Electrical sheet. i want to know whether it is made of base metal or plastic. in both the case scrap of base metal and plastics are liable to duty. You are paying duty on the manufactured product. if you remove the scrap on payment of duty then you need not reverse the credit taken. This is my view.

[Varun Arora]

Dear Sir,

We are paying excise duty on Scrap and Electrical steel is made of Base metal.

Thank you all experts for your valuable suggestions.

[Varun Arora]

Dear Kasturi Sir,

I think Solar Pump is exempted under NN 12/2012 and is not covered under Rule 6(6)(iva).

Sir please correct me if i am wrong.

[MUKUND THAKKAR]

sir,

Need not reverse excise duty Rule 6(6)(iva). please read notification

Notification No. 25/2012-Central Excise (N.T) New Delhi, the 8th May, 2012

[KASTURI SETHI]

Sh. Varun Arora Ji,

I did not mean to reverse. I mentioned Rule 6(6)(iva) with an intent to examine the possibility of non-reversal. I did not go into detail because you r highly qualified. Only clue was sufficient.

After going through all replies, I agree with Sh.Mukund Thakkar, Sir. Your problem is solved. No need to further make efforts. Let the new problem or query enter into this forum.

[Varun Arora]

Thank you all Experts !!

Mukund Sir My Item is not supplied for use of foreign diplomatic missions or consular missions or career consular offices or diplomatic agents in terms of Provision of NN 12/2012 (Entry no. 329) but my item is covered in Entry no. 332

This language is i am using through 6(6)(iva) and using NN 25/2012.

Sir please let me know i am missing any provisions.

Thanks a lot.

[Varun Arora]

Also through NN 25/2012 point 6(6)(viii) is inserted i.e. supplies made for setting up of solar power generation projects or facilities.

Sir i am supplying to my client who is manufacturing solar submersible pump whether i can say that i am supplying for setting up of solar power generation projects or facilities.

[KASTURI SETHI]

Sh.Varun Arora Ji,

There must be some contract executed between your buyer and his buyer. Only terms and conditions of the contract can reveal where the goods in question are to be used ultimately. Is there any agreement ? Pl confirm.

However, it appears to me for solar projects, your goods are covered under Rule 6(6)(viii). Sh.Mukund Thakkar, Sir is very much right from the very first reply.

AI Summary

Cenvat credit reversal not required when supplies are for exempted solar pump manufacture and scrap is dutiable.
Cenvat credit reversal is unnecessary where scrap is removed on payment of duty and inputs are used to produce goods covered by the solar exemption; applicability depends on verifying the buyer's entitlement to the exemption and confirming that scrap is dutiable, since those factual conditions determine whether proportionate reversal is required.