Repair / Return / Re-entry of Goods - Central Excise Practice Manual (OLD) - Central Excise

REPAIR/ RETURN /RE-ENTRY OF GOODS There are certain circumstances which may necessitate the bringing back of duty paid goods to the factory, though normally it is not permitted [Rule 16]. Rule 16 of Central Excise Rules, 2002 deals with return of any duty paid goods, which provides that excisable goods which have been removed on payment of duty can be brought back to the same factory or any other factory also for the following purposes - 1. For re-making or 2. For re-fining or 3. For re-conditioning or 4. For any other reason (such as excess goods, non-acceptance of goods by buyer, for exhibition, due to accident etc.) According to this rule the assessee shall be entitled to have Cenvat credit of the duty paid as if such goods are received as inputs under the Cenvat Credit Rules, 2002. However assessee cannot avail Cenvat credit if goods were originally cleared without payment of duty. Documents to avail Cenvat credit: The assessee can avail Cenvat credit either - · On the basis of sender's excise invoice under which he sends the goods to the factory, or · On the basis of manufacturer's own invoice (triplicate copy retained by the manufacturer earlier) which was raised when the goods were originally cleared. Further Rule 16 applies only when goods are received in the factory (factory does not cover the office of assessee located outside the factory). Others' goods (i.e. besides manufacturer's own goods) can also be brought in the factory for repairs etc. provided they are accompanied by the duty paying documents, otherwise permission from Commissioner will be required [Rule 16(3)]. After repair etc. goods can be sent to anyone. It is not necessary to sent the goods only to the person from whom these are received. Time limit: Rule 16 is silent with regard to the time limit within which goods can be brought back into the factory for above mentioned processing or for the removal of such goods after such processing. Thus there is no time barrier and goods can be brought back at any time. Private Records of the returned goods: The assessee shall have to state the particulars of such returned goods in his records. No statutory records are required, assesses own private records are sufficient. He could maintain a register giving all details regarding the returned goods. Re-return/ removal of goods after undertaking processing activity: 1. Where the process undertaken does not amount to manufacture - In case where the process undertaken (such as remaking, refining etc.) by the assessee on the returned goods does not amount to manufacture, on subsequent removal of such goods the assessee shall have to pay an 'amount' equal to the Cenvat credit availed at the time of the receipt of such goods inside the factory. Thus the assessees position remains neutral as credit availed at the time of entry is paid as a duty at the time of removal. 2. Where the process undertaken amounts to manufacture - In case where the process undertaken by the assessee on the returned goods amount to manufacture, on subsequent removal of such goods the assessee shall have to pay duty at the rate applicable on the date of such removal and on the value determined as per section 3(2), 4 and 4A as the case may be. The process undertaken will be said to amount to 'manufacture' if the capacity or performance of the goods increases beyond the original capacity or performance when they were sold first time. Notes: · If some components/ parts or inputs are used in processing and where such process does not amounts to manufacture duty will be payable on such components even if Cenvat is not availed. Where process amounts to manufacture, duty will be payable on basis of transaction value of whole article. · In case where the returned goods are rejected in processing and cleared as scrap or waste an amount equal to Cenvat credit availed should be paid i.e. Cenvat credit availed shall be reversed. Fresh duty is payable where fresh goods are sent as returned goods are scrapped. Where the assessee finds difficulty under Rule 16 - Where the assessee finds any difficulty in following the procedure given in Rule 16 such as where goods are not accompanied by invoice document, permission has to obtained from commissioner for bringing goods for repairs etc or intimation about receipt of goods should be given within 24 hrs to Range Superintendent under Rule 16(3) [as per trade notices issued by commissioner of central excise such as Jamshedpur TN 21/2004].