Dear experts & other fellow members,
We are a manufacturing company registered under CE Act, regularly procure inputs from our supllier. Broadly the system is, material received into the fatory and genrates C-Note, then after quality check generates GR(Goods Receipt) and Finally payment based on the GR qty. We take CENVAT credit mentioned on the invoice(For total material), but we pay to our vendor for the accepted qty as reflected in the GR through SAP(i.e. after reducing on pro-rata basis including the taxes) and supplier takes the rejected material from us under excise challan as per Rule 11 CE Rules(i.e we pay/reverse the CENVAT credit for the said qty).
At times it happens that supplier dont take the material back due to practical problems. My query is whether we can enjoy the CENVAT credit on the rejected material which is lying in my factory?(as supplier is not taking the material back) Because my view is we can not enjoy CENVAT Credit as:
1) On record we have declared, that the said material as "Rejected"(i.e. the material can not be used for output)
2) We have taken credit for full qty but paid only for accted qty(i.e. credit taken 100 as agaisnt the payment of say 80).
Strange is our supplier never raised any issue in this regrad, I dont know how they are managing their accounts/Excise Dept.
On the contrary, my view in favour of taking credit is, assessee can enjoy the credit the moment material enters into factory till it reomves from the factory. In my case the rejected material is lying in our factory. But whether it can be treated as ïnputs" considering the fact., the material is declared as rejected?
Please answer/reply/respond. It would be great if the reply comes with latest rule position, notification or case laws if any in this regard.
Thanks in advance
CAclubindia
