Writte off some SFG Material and transfer to scrap location

[Guest]

Dear Sir,

we write-off some stock like (SFG & R.M )and same items are transfer to scrap location. and when we clear the scrap from factory we paid Excise duty on that scrap.

So in this above case we need to pay Excise duty for the write off the SFG and R.M or not ?

Swapneswar Muduli

[Rajagopalan Ranganathan]

Sir,

If you remove SFG on payment of duty then you need not reverse the credit taken on inputs used in the manufacture of such SFG. In case of RM you should pay the duty on transaction value or the credit taken on such RM whichever is higher. You need not reverse the credit in view of write-off of SFG & RM since you are paying appropriate duty on their removal from your factory.

[YAGAY andSUN]

Rule 3(5B) of the CENVAT Credit Rules, 2004, provides that if the value of any input on which Cenvat credit has been taken is written off fully in the books of accounts, then the manufacturer is required to reverse the credit taken on the said input.

For details please check Circular No. 907/27/2009-CX, dated 07.12.2009

[Ganeshan Kalyani]

I agree with the views of Sri Rajagopalan Sir. Thanks.

AI Summary

Cenvat credit reversal applies to written off inputs; paying duty on removal typically avoids credit reversal. If semi-finished goods are removed on payment of excise duty, input credit need not be reversed; for written-off raw materials, duty must be paid on the transaction value or an amount equal to the credit taken, whichever is higher. Rule 3(5B) requires reversal where inputs are fully written off in the books, so manufacturers should align book write-offs with duty payment practice and follow departmental circular guidance.