CENVAT Reversal against sample testing

[Rajesh Purohit]

Kind attn. Kasturi Sethi Sir

A pharmaceuticals manufacturer have to test their each and every batch in house (not sent out side) before final packing.

Although Chapter11 provide 'NO DUTY ON SAMPLE'' until cleared/removal from the factory. But can department demand reversal of CENVAT against sample used for testing ? whereas this testing is part of manufacturing process.

Please cleaify all the experts

[KASTURI SETHI]

Sh.Rajesh Purohit Ji,

If final product is dutiable, then no reversal of Cenvat Credit is required on the value of sample used captively in the manufacture of FINAL product. In the scenario explained by you, it is a case of captive consumption. See Notification No.67/95-CE dated 16.3.1995 as amended vide Notification No.19/14-CE dated 11.7.2014 read with Board's Circular No.96/85/2015-CX dated 7.12.15 (Para No.B-18 refers.)

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AI Summary

Captive consumption of in house sample testing: no reversal of Cenvat credit where samples are consumed in making dutiable final products. When the final product is dutiable and samples are tested within the factory as part of the manufacturing process, the value of those samples consumed captively does not attract reversal of Cenvat credit; such testing is treated as captive consumption and part of manufacture rather than a removal requiring credit reversal.