Excise Credit

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Rahul G Asai

Service

37 Points Posted on 11 November 2009

Dear Sirs,

This query is related to credit taken during Goods Receipt in a manufacturing plant. Scenario goes like-

A manufacturing plant has got 30000 Rs/- credit available in RG23A/C part II register. on 11 Nov'09, plant received goods with ED values as 10000 Rs/-. They take the credit in part II register and the total credit available to a plant is now 40000 Rs/-.

Now, during quality check the material gets rejected. Hence, the plant send the goods back to the vendor on their (Plant in this case) excise invoice. This generates a liability of 10000 Rs/-. Liability as o today for this month is 70000 Rs/-. Therefore, total liability is now 80000 Rs/- which is payale on 5th of December 2009.

Therefore the company / plant enjoys a extra credit of 10000 Rs/- in part II register. Can you please explain, elaborate, what benefit a plant can enjoy from this 10000 Rs/- credit? (Ultimately, plant will end up paying 40000 Rs/- only after utilization of credit on 5th of next month.)

So, with additional credit of 10000 Rs/-, can plant utilize it somewhere? Or, is it just a G/L balance ?

Regards,

Rahul G Asai

Replies (3)

Vijay D

Finance Executive

227 Points Posted on 12 November 2009

Dear Rahul,

At the time of purchase return you will have to reverse (Credit) Input cenvat credit a/c & same will also effect (reduce) balance of your RG23A/C part II register. So there is no option to enjoy this amount.

Regards

Rahul G Asai

Service

37 Points Posted on 12 November 2009

Dear Vijay,

Thanks for your response. You will be enlighten to know that-

Since the payment of duty also includes “ amount payable under Cenvat Credit Rules, 2004 as per Notification No.8/2007-Central Excise,(NT) dated 1.3.2007 which has introduced Explanation to Rule 8 of Central Excise Rules, 2002, the ED for Vendor Return can also be clubbed under monthly payment scheme as per Rule 8 instead of debiting Entry transaction level.

So, vendor return excise duty can be paid later whenn utilization is done for Excise Duty. Only liability of excise duty needs to be created at the time of vendor goods return.

Can you please help / come back what extra benfits can be derived from this extra credit?

Regards,

Rahul