Written off Provision

[MITSUI PRIME ADVANCED]

Dear Sir,

We have writte off provision in Profit & Loss Account as a 'Provision for inventory Obsolescence

Auditor has covred under Cenvat Credit Rule, 2004 rule 5 (5B)

 

[(5B) If the value of any,

        (i) input, or

        (ii) capital goods before being put to use, ²⁵[on which CENVAT credit has been taken is written off fully or partially or where any provision to write off fully or partially has been made in the books of account then] the manufacturer or service provider, as the case may be, shall pay an amount equivalent to the CENVAT credit taken in respect of the said input or capital goods:

        Provided that if the said input or capital goods is subsequently used in the manufacture of final products or the provision of ³²[output services], the manufacturer or output service provider, as the case may be, shall be entitled to take the credit of the amount equivalent to the CENVAT credit paid earlier subject to the other provisions of these rules.]

³³[Explanation. – If the manufacturer of goods or the provider of output service fails to pay the amount payable under sub-rules (5), (5A), and (5B), it shall be recovered, in the manner as provided in rule 14, for recovery of CENVAT credit wrongly taken.]

please provide your advice

its is covered under wirtte off provisio rule 5(5b)

interest under section 11AA applicable???

Please provide your valuable advice.

Regards

Arjun Sacdheva

[YAGAY andSUN]

CENVAT Credit according to the provisions needs to be reversed.  Further, if the amount is recovered under Rule 14 of the CCR, 2004, then statutory interest can be levied.

AI Summary

Cenvat credit reversal required on written off inputs; recovery under the prescribed procedure may attract statutory interest. Where inputs or capital goods on which CENVAT credit was taken are written off or a provision to write off is made, an amount equivalent to the CENVAT credit taken must be paid; subsequent use of those goods allows re credit of the amount paid subject to the rules. Non payment is recoverable under the stipulated recovery procedure, and recovery effected under that procedure can attract statutory interest.