excise duty demand

[Anil Jangid]

Hello Sir, I have purchased an asset for my manufacturing unit over the period of years and have not claimed excise at the time of purchase. However when i had cleared the asset in 2014 -2015 in one goal, I have not charged excise at the time of sale. The excise dept however claims that you need to pay excise duty at the time of clearance undoubtedly you have availed excise credit or not? If i don't have to charge excise at the time of clearance, Can someone provide me details or circular or notification for the same please. Awaiting,

[DR.MARIAPPAN GOVINDARAJAN]

It is on your part to avail CENVAT credit on excise duty paid on capital goods. If you do not avail CENVAT credit you cannot absolve from the levy of excise duty at the time of sales.

[Rajagopalan Ranganathan]

Sir you cannot refuse to pay duty on the asset cleared by you on the ground that you had not availed the credit of duty paid on such asset at the time of purchase. Rule 5A (a) of Cenvat Credit Rules, 2004 " If the capital goods, on which CENVAT credit has been taken, are removed after being used, the manufacturer or provider of output services shall pay an amount equal to the CENVAT Credit taken on the said capital goods reduced by the percentage points calculated by straight line method as specified below for each quarter of a year or part thereof from the date of taking the CENVAT Credit, namely:-

(i) for computers and computer peripherals:

for each quarter in the first year @ 10%

for each quarter in the second year @ 8%

for each quarter in the third year @ 5%

for each quarter in the fourth and fifth year @ 1%

(ii) for capital goods, other than computers and computer peripherals @ 2.5% for each quarter:

Provided that if the amount so calculated is less than the amount equal to the duty leviable on transaction value, the amount to be paid shall be equal to the duty leviable on transaction value.

Moreover as per rule 5A (b) of Cenvat Credit Rules, 2004 "if the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value. This rule is applicable to asset purchased at the time when no credit of duty paid on such asset was allowed. However this point is arguable and the same is to be settled by CESTAT/Courts.

AI Summary

Excise duty on capital goods: clearance attracts duty even if CENVAT credit was not availed, with prescribed reversal rules.
Excise duty arises on clearance of capital goods even if CENVAT credit was not availed at purchase. Where CENVAT credit was taken, the manufacturer must pay an amount equal to the credit taken reduced by prescribed quarterly percentages; if that amount is less than duty on transaction value, duty equal to transaction-value duty is payable. Clearance as waste or scrap attracts duty equal to the transaction-value duty. The applicability of these provisions to assets bought when credit was not allowed is arguable.