transfer of capital goods from unit 1 to unit 2

[deepak VORA]

Dear Sir,

I am having two units having different excise number but under same range producing similar products.

I want to transfer one old machine running in unit 1 to unit 2. Can i transfer the same using an annexure or do i have to make an invoice. Please guide.

Further i have also purchased one machine in unit 1 but the same also to be installed in unit 2 now. The invoice already received and accounted in unit 1?? How can i install this machine in Unit 2 without making an invoice??

[Himansu Sekhar]

Case1: if you have taken credit in the same machine at unit 1, then you have to reverse the credit. Invoice is essential. If no credit taken initially then there is no need for reversal of credit .also no invoice required.

Case 2: if the goods have been received at unit 2 and the invoice at the address of unit1, then the suppliers can issue a note for diversion on the bill itself for sale in transit. For cex , both the units are independent units. If both the goods and invoices received in unit1 then making one invoice and reversal of credit is required.

Reversal of credit is another issue.

[deepak VORA]

Dear Sir,

Thanks for your reply.

I want to transfer the machinery and not the raw material or finished goods

[Himansu Sekhar]

Please refer to rule 3(5), 9 of cenvat credit rules 2004.more specifically to rule 9(1)(a)(I)(II), when you take credit, the goods if cleared from factory, invoice is essential under rule 11 of central excise rules. If you have not taken the credit, no invoice is required, but your second unit cannot take any credit in absence of any proper document. For central excise rules, there are two units.

[Himansu Sekhar]

As per rule 3(5) of CCR

"When inputs or capital goods, on which cenvat credit has been taken, are removed ........... An invoice referred to in rule 9."

As pert sec. 2(d), of the CE act, these are excisable goods and under rule 9 of CCR read with rule 11 of CE rules invoice is required.

[Ganeshan Kalyani]

yes both the units are different in the eyes of law. So, issuing invoice is essential to take credit by the receiving unit. The sending unit need to reverse the credit, if it has availed. In first scenario, also need to see the reduction of credit on purchase at the rate of two and half percent per quarter. and if the value has been zero in the books of account then excise duty on the transaction value need to be paid.

AI Summary

Cenvat credit reversal required when capital goods transferred between separately registered units; receiving unit needs invoice to claim credit.
Transfer of capital goods between separately registered units triggers invoice formalities and cenvat credit consequences: if the sending unit availed credit it must reverse that credit on removal; the receiving unit may only take credit with proper documentary evidence such as an invoice, whereas absence of prior credit avoids reversal but prevents the receiving unit from claiming credit.