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.

[YAGAY and SUN]

Please check Rule 16 of the CER,2002 as amended time to time, in this regard.  You may avail/reverse (as the case may be) the CENVAT credit only on 300 ltrs since 100 ltrs. of pain have not been returned to you.

AI Summary

CENVAT credit entitlement limited where goods are not fully returned; credit may be adjusted only for returned quantity.
The operative guidance states that CENVAT credit can be availed or reversed only in respect of the quantity physically returned; goods consumed in quality testing and not returned cannot be treated for credit reversal or availment.