matl quality prblm - consumption loss - credit reversal

[venkat eswaran]

Sir,

We have paint mfg industry.  There is a quality problem at customer end and part qty he consumed as a quality analysis and testing purporse and rejected. actually we supplied 400 ltrs. but he returns only 300 litrs. balance 100 ltrs gone as loss in quality problem testing. how can i reverse the excise duty  and sales tax amt for total qty or whatever he returns qty? physicaly they retuend 300 ltrs only.

AI Summary

Paint Company Can Reverse Excise Duty on 300 Liters Returned, Not on 100 Liters Lost Per Rule 16. A paint manufacturing company faced a quality issue with a customer who used part of the supplied paint for testing, resulting in a rejection. Out of 400 liters supplied, only 300 liters were returned, with the remaining 100 liters lost during testing. The company seeks guidance on reversing excise duty and sales tax for the total quantity or only the returned quantity. The response advises checking Rule 16 of the Central Excise Rules, 2002, and states that CENVAT credit can be availed or reversed only for the 300 liters returned, not for the 100 liters lost.