Cenvat Treatment of sale return when goods declared as Scrap

[Guest]

Hi,

We have a sale return & after reciving the goods back in our factory premises we have declared those goods as scrap.

1 Can i awail cenvat credit on return goods?

2 After declaring the goods as scrap is there any cenvat liablities stand to pay the amount?

[YAGAY andSUN]

Yes, you may take the CENVAT credit on the returned goods.  Amount equal to CENVAT credit taken will be payable even if the returned goods are rejected and cleared as scrap.

In CCE v RFH Metal Castings (2005 (2) TMI 235 - CESTAT, NEW DELHI) =2005 (184) ELT 194 (CESTAT) asssessee processed the retunred goods but they got rejected in processing.  Theses were cleared as scrap and duty was paid on scrap value.  It was rightly held that though scrap is different from the goods, it does not mean that assessee 'manufactured' scrap. No one undertakes a process to produce scrap.  Hence, 'amount' equal to CENVAT credit availed should be paid even if, processed goods are removed as scrap - followed in Menon Piston Rings v. CCE (2007 (2) TMI 22 - CESTAT,MUMBAI) =2007 (211) ELT 394 (CESTAT) - same view in CCE v. Chanvim Engineering (2008 (1) TMI 111 - CESTAT, MUMBAI) = (2008 225 ELT 131 (CESTAT SMB).

CENVAT credit of amount -  The buyer can avail CENVAT credit of amount paid under Rule 16(2) - Explanation to Rule 16(2).  He can of course, availed CENVAT credit of duty paid under Rule 16(1).

[Guest]

Thanks a lot sir

AI Summary

CENVAT credit on returned goods remains claimable, but equivalent credit must be paid when the goods are declared scrap. CENVAT credit may be taken on returned goods, but if those returned goods are processed and cleared as scrap an amount equal to the CENVAT credit availed must be paid; scrap clearance does not amount to fresh manufacture and does not negate the obligation to reverse or pay an amount equivalent to the credit. A buyer who pays duty under the Cenvat Rules may avail CENVAT credit of that duty in line with the rules' explanation.