waht id the treatment of cenvat credit when stock is write off from the Book

[Guest]

Dear Sir,

We are a manufacturer and we written of some Rm, SFG & FG due to non moving stock from long times physically we have transfer these stocks to scrap and when we will sale these scrap we paid the duty on transaction value.

So can any one clarify me what is the Cenvat Credit treatment on that write off RM, SFG & FG.

Some FG which we declared in RG-1 as a stock on that case also how we remove these stock from RG-1 and how we mentioned these stocks in our ER-1 Return also.

Regards

Swapneswar

[KASTURI SETHI]

When any stock is written off cenvat credit taken has to be reversed. If raw material is written off, the whole amount of credit involved on that qty. is to be reversed. If finished goods or semi-finished goods are to be written off, then proportionate credit is to be reversed. Better option is to reverse the credit on the basis of C.A. 's or Cost Accountant's certificate.If you have cleared RM as scrap and paid duty on that scrap, no reversal is required. Scrap is also a final product.

[Guest]

Tank you Sethi Sir,

Yes we have transfer these RM & SFG to scrap and these scrap we will cleared from Factory with payment of duty.

I s there any notification or circular regarding non reversal of input credit in write-Off the stock from Books and transfer to these stock to scrap after that we will pay duty on removal of these scrap ? Please provide me notification or circular no.

As per circular No-907/272009 we need to reverse the input credit on stocks which we write-Off from books of accounts. But there is no clarity if we transfer these stocks to scrap location and we will remove these scrap by payment of duty as the time of sale.

So please what can we will do in above case.

Regards

Swapneswar

[KASTURI SETHI]

Transfer to scrap location is no problem.Now there is no Excise Bonded Store room where finished goods were used to be stored. Scrap can be stored anywhere in the factory premises without any legal hurdle.

[Guest]

Dear Sethi Sir,

Thanks for your reply..

But i want to know if we transfer these stocks to scrap and we remove these scraps with payment of duty when we will sale it.

In this case should we need to reverse Input on these stock which we write off from books of accounts and transfer to scarp ?

If yes on which amount we need to reverse the duty ?

For Example:-

Our Original Purchase on inputs Value is ---- 10000

Inputs credit on that ---- 1250

We sale as a scrap after write off from book ---- 1000

We paid excise duty on these scrap ---- 125

So in above case we need to reverse the rest of duty that is 1125 on that invoice or not ?

Regards

Swapneswar Muduli

[Suryanarayana Sathineni]

Dear Swapneswar,

As per the provisions of Cenvat Rules, if any inputs or capital goods written off ( fully or partially) then the assessee is required to reverse the cenvat credit involved on those written of items from cenvat account. However, if any of such items written off and subsequently put in use then the assessee is eligible for taking the credit reversed on such item/s.

In case of Finished Goods, ( presume that they have already accounted in Daily Stock Account), you have two options

thay are 1. to clear for destruction on payment of duty on cost +10% ( since sale is not involved) or to apply for remission of duty under Rule 21 of CCr,2202 and to reverse the proportionate credit on the inputs contained in that Finished goods at the time of destruction after getting the permission for remission of duty from the Authority.

Best Regards

Suryanarayana

AI Summary

Cenvat Credit Reversal Required for Written-Off Stocks Unless Cleared as Scrap with Duty Paid; Follow Cenvat Rules. A manufacturer inquired about the treatment of Cenvat Credit when raw materials (RM), semi-finished goods (SFG), and finished goods (FG) are written off and transferred to scrap. The response clarified that Cenvat Credit must be reversed for written-off stocks unless they are cleared as scrap with duty paid, in which case no reversal is needed. It was advised to reverse credit based on a cost accountant's certificate. Further clarification was sought on whether input credit needs reversing when stocks are scrapped and duty is paid upon sale. The discussion emphasized compliance with Cenvat Rules and potential options for handling finished goods.