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Cenvat rule

swetha (Finance Manager) (140 Points)

07 February 2013

what is the Cenvat Credit rule when the finished goods is cleared as scrap ,and also the inputs goods is cleared as scrap.Lying in our factory for more than 10 years which is now not useful to us.

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4 Replies

Prabhat Kumar (Advocate & Consultant) (1912 Points)
Replied 07 February 2013

As per Cenvat Credit Rule, waste or scrap of final product is treated as final product and it shold be cleared as if the same is final product.However if input became scrap it can be cleared after payment of Cenvat Credit taken on it when it was received.

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Durga prasad Ambati (Taxation, Pursuing CA) (737 Points)
Replied 07 February 2013

Raise Invioce In the name of "REMOVE AS SUCH " and pay the exicise duty what you have taken as Input.

Rakshit (practising) (338 Points)
Replied 08 February 2013

Pay excise duty on the transaction value of scrap and reverse full cenvat credit taken on inputs as the same were not used in the manufacture of final products.

Regards

Raksh*t

9810525780

CA Saravanakumar (Practice) (59 Points)
Replied 08 February 2013

Dear Ms. Swetha,

Since waste and scrap is also treated as an excisable commodity and also classified as such under the Central Excise Tariff Act, the accounting, storing and removal of such waste and scap shall be at par with any other excisable commodity, In order to ensure smooth availment of Cenvat credit, there should be a proper account of waste and scrap arising during the course of manufacture of final product,

Normally the scap memo duly certified in quality control inspection will be available in any factory to indicate the type of waste and scrap as well as the quantity. It is suggested to ensure that this practice is followed since there is no prescribed record under the cenvat scheme and in terms of Rule9(5) the assessee should maintain proper records for receipt, disposal and inventory of inputs/capital goods.

The Waste and scrap arising at the factory must be stored in a proper manner when accounted in Daily stock account and thereafter removed on payment of duty under cover of an invoice.

Input credit need not be reversed in respect of scrap since cenvat credit rules does not require the assessee to reverse the same when it is removed. Credit needs to be reversed only when in the following cases in the context of scrap

a. If input before being put to use has become scrap then credit needs to be reversed since the said input is not used in manufacture of final product

b. If remission under Rule 21 is received from the central excise officer by the assessee then input need to be reversed as per Rule 3(5C) of Cenvat Credit rules

c, If input on which credit has been availed but written off fully or partially in the books of accounts or provision to write off such input is made in the books of accounts then taken credit needs to be reversed. (Rule 3(5B))

Thanks,

Saravanakumar G