Reversal on input tax credit on capital goods under Tnvat act

[THYAGARAJAN KALYANASUNDARAM]

Dear expert,

one of my manufacturers of automobile components and related goods. They have purchased capital goods and which is used for producing finished taxable goods. In the financial year 2014-15 they have sold goods within the state as well as interstate sales. The sales tax authority reverse the input tax credit proportionately towards cst sales.

my question is even reversal of itc even applicable to capital goods?

AI Summary

Input tax credit reversal on capital goods: not triggered when capital goods produce taxable goods; contest reliance on omitted provisions.
Proportional reversal of input tax credit on capital goods was contested where the manufacturer's capital goods were used exclusively to produce taxable goods but sales included interstate transactions. The tax authority invoked interstate-sale provisions to reverse credit; the dealer asserted those provisions do not apply because no exempt goods were produced and capital goods credit is allocated across years. A subsequent amendment omitted the invoked provisions, but the transactions predated that amendment; commentators advise challenging the reversal by relying on the rule limiting reversal to capital goods used for exempt goods and on allocation rules for capital goods credit.