cenvat credit reversal on capital goods-reg

[Ramakrishnan Seshadri]

Dear Sir,

We are having one imported machine imported during 2011. We have taken cvd and sad. Now we want to sell the machine. What is the procedure. whether the sad amount also has to be reversed or only cvd has to be reversed.

how to go about it. Kindly experts please clarify.

Thanks & Regards,

S.Ramakrishnan

[Nitesh Jain]

Dear Ramakrishan Ji,

You can remove capital goods under a cover of Central Excise Invoice by reversing proportionate Cenvat Credit of CVD and SAD both as per Rule 3(5A)(a) of Cenvat Credit Rules 2004.

But if you are removing those capital goods as waste and scrap then you will be required to pay Central Excise Duty on transaction value as per Rule 3(5A)(b).

[Rajagopalan Ranganathan]

Sir,

According to rule 3 (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.

(b) If the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value.

You have to comply with the above provisions when you dispose of either locally procurred capital goods or imported one.

[Ganeshan Kalyani]

Sir, in nutshell Cenvat credit covers CVD and SAD as well and therefore when the capital goods is removed on which credit was taken in past, needs to be reversed in the manner elaborate by Sri Ranganathan Sir. Thanks.

[KASTURI SETHI]

I agree with all the experts. Views expressed by the experts are crystal clear.

[Ramakrishnan Seshadri]

Dear Sirs,

I agree with the experts. whether i have to reverse the sad amount also

Thanks & Regards,

S.Ramakrishnan

[KASTURI SETHI]

Sh.S.Ramakrishnan Ji,

Yes. If you do not opt for payment of duty on transaction value for removal of such capital goods after period of 11-12 years, you will have to reverse credit of SAD also.

AI Summary

Cenvat credit reversal on capital goods: both CVD and SAD credits must be reversed or duty on transaction value paid. Cenvat credit reversal on disposal of capital goods requires payment equal to the CENVAT credit taken reduced by quarterly straight line percentages; if that calculated amount is less than the duty leviable on transaction value, the duty on transaction value must be paid. Clearance as waste or scrap mandates payment equal to the duty on transaction value. Cenvat credit covers both countervailing duty and special additional duty, and both must be reversed when capital goods are removed unless duty on transaction value is paid.