removal as such-invoicing

[Dalia Felix]

Is it possible to adopt 'removal as such' when the transaction value is more compared to the purchase price for the inputs? What are the precautions to be taken and how the invoicing is to be done?

[Rajagopalan Ranganathan]

Madam/Sir,

As per Rule 3 (4) (b) of CENVAT Credit Rules, 2004 the CENVAT credit may be utilized for payment of an amount equal to CENVAT credit taken on inputs if such inputs are removed as such or after being partially processed. When you remove the inputs as such you have to simply pay back the credit taken on the input under the cover of your invoice issued under rule 11 of Central Excise Rules, 2002.

If you charge higher price it will result in your profit and the same will be dealt with by the provisions of VAT Act and/or Income Tax Act. Central Excise Act, 1944 was not concerned with it.

[PAWAN KUMAR]

Dear Sir,

The reply of Sh.Ranganathan Sir is correct. You may charge whatever price but excise component will be equivalent to Cenvat Credit taken on such goods as per rule 3(5) of Cenvat Credit Rules, 2004.

[YAGAY and SUN]

It may also fall under the category of Trading Activity. The Department may ask that you were not eligible for availment of CENVAT credit.

AI Summary

Cenvat credit reversal when inputs are removed as such - excise liability equals credit reversed; pricing affects VAT and income tax.
Where inputs are removed as such or after partial processing, the registrant must pay an amount equal to the Cenvat credit taken on those inputs by issuing an invoice under rule 11; the excise component is effectively the credit reversed. Charging a higher selling price creates VAT and income tax consequences but does not change the excise reversal requirement. Repeated removals as such may invite departmental scrutiny as trading activity and challenge the eligibility to avail Cenvat credit.