Removal of Goods after being remade under Rule 16, Central Excise

[Gaurang Shukla]

Can a manufacturer receive goods for repair/remaking/refurbishment under Rule 16 , 

supply a new article from whom the goods are received and supply the refurbished/reconditioned item to another unit ? 

The question is - whether goods can be recycled amongst various manufactures who are sending goods for reconditioning ? If yes , how is the Duty liability to be discharged.

The question here is not of Cenvat Credit. THe manufacturer does not take credit as the goods are not accompanied with duty paying documents. Also , the goods being received for repair /reconditioning are not necessarily manufactured by him. Permission is availed under Sub rule 3 of Rule 16 from Commissioner.

Please clarify

Thanks

  

Posts / Replies

[Pradeep Khatri]

Dear Gaurang,

If a new good emerges then it would certainly attract C.E. Duty.

Regards

Team YAGAY & SUN

(Management & Indirect Tax Consultants)

[Gaurang Shukla]

No. the new good does not come in to existence . But the issue is - 

A sends good x for repair to manufacturer M.

M supplies new good X to A , ( from stock or kept ready under prior intimation ) . 

Repairs good x recd. from A and supplies to B , who returns good x from his end to M. 

The repaired goods keep circulating this way , being sent first and goods to be repaired received later. 

How and in what way to charge Excise ? On What value ? The consideration should be the rate of new good X or concessional value of x (reconditioned ) ? 

[Rajagopalan Ranganathan]

Dear Shukla,

          You have to pay duty on the product supplied from your stock in lieu of the returned product. 

           Since the returned product is not accompanied by any duty paying document, you have to pay duty on the repaired product also unless you are able to prove that the process to which the returned product is subjected to does not amount manufacture.

          If the product is returned to the same assessee who originally manufactured the product, he can prove the duty paid nature of the product from his own records (triplicate copy of the invoice) and take credit of duty paid on the product.  If the product is manufactured by a third party and you have received it for repair with out duty paying document, then when clearing the product after repair you have to pay duty again.

        The person who sends the product for repair, if he had taken credit of duty paid on it, then he has to send the product for repair only under his invoice indicating the reversal of the credit taken.  You can take this amount as  credit and remove the repaired product  from your factory on payment of duty utilizing the credit taken.

 

[Madhukar N Hiregange]

The input used in repair would have to be be done after reversing the credit if any availed. No bar in mixing up and using the repaired parts to replace other parts. Proper account be kept to avoid charges of removal of FG in guise of repair.