Reversal of cenavt credit on consumable items

[DINESH AGGARWAL]

Dear Sir, We are manufacurer of Copper and Articles thereof ch. 74, also we are doing job work under Notification 214/86 for our customers of same product. we are taking undertaking of duty liability on final products from customers. During the AUDIT of F.y. 2002-03 , Excise Auditor were raised an audit objection para that you are availing cenvat on coman consumbale inputs, which are simunteneously using in maufacturing of dutiable final products as well as for job work under Notification 214/86. Now AUDITORS wants that we should reversed cenvat crdit on conumable items on the basis of pro-rata or @ 8% amout reversed UNDER CENVAT CREDIT RULES 6, on the jobwork goods,giving suggestion you should maintain separate inventory records of consumbale items.But our contention is that, how where, we are producing exempted goods, we are doing job work only under Notification 214/86. Please advise that we are right or department both under which rules of CE. Til date,department could not raised Show Cause Notice to us, only they reminds time to time, please clear the audit objection para of auditors.

AI Summary

Cenvat credit reversal: conditional exemption means principal bears duty; quantify consumable use and invoice to avoid reversal.
The notification's exemption is conditional and fiscal liability for final products lies with the principal manufacturer who must account for materials and discharge duty. A job worker who has taken credit on his own raw materials need not reverse that credit under Rule 6; tribunal precedent supports this. To avoid disputes, quantify consumable usage monthly and raise invoices to the principal reversing proportionate credit so the principal can avail the credit, maintaining revenue neutrality.