Capital goods rejection

[yateen vyas]

Sir,

One of our capital goods got rejected and we have taken 100 % credit for returning the goods.But at the last time goods were again checked and found ok.Now tell me what should i do now,

because we have made invoice for outgoing of capital goods to purchaseer.

[YAGAY and SUN]

Dear Yateen,

You can cancel the invoice and provide the intimation to the Department through www.aces.gov.in. You need to disclose all material facts to the Department and reverse the 50% CENVAT credit immediately. Department may ask to pay the interest to wrongful availment of 100% CENVAT credit but you should stick to your factual contentions.

Regards

YAGAY and SUN

(Management and Indirect Tax Consultants)

[yateen vyas]

Thanks a lot for quick and valuable suggestion.

[Rajagopalan Ranganathan]

Sir,

if you have remaining 50% credit in your cenvat credit account you need not pay any interest. Interest is payable only when the excess credit was utilized for payment of duty on finished goods. if it is not utilized and is available in the credit account mere reversal will suffice.

[YAGAY and SUN]

Dear Yateen,

Mere having 50% balance in CENVAT credit account does not mean that you have not utilized such credit, but utilization of CENVAT credit will determined by the adopting the FIFO method.

Regards,

YAGAY and SUN

(Management and Indirect Tax Consultants)

AI Summary

Capital goods CENVAT credit reversal required after rejection; cancel invoice, intimate department and reverse half credit.
Where full CENVAT credit was taken on capital goods later rejected and subsequently found acceptable, the taxpayer should cancel the outward invoice, intimate the department via the official portal, disclose material facts and reverse the excess credit. Interest may be payable if the excess credit was utilized for duty payment on finished goods; application of the FIFO method determines whether utilization occurred, so reversal and documentation are required to address any departmental queries.