Removal of capital goods - reversal of cenvat

[madhavvan n]

where service provider calims cenvat credit on capital goodsand thereafter sells them after period of 4 years is he required to reverse any cenavt credit how can service provider remove capital goods as per provisions of act since service provider cannot raise any invoice for capital goods

[Guest]

Please refer to rule 3(5) of the cenvat credit rules, 1994 which read as: "Provided also that if the capital goods, on which CENVAT Credit has been taken, are removed after being used, the manufacturer or provider of output service shall pay an amount equal to the CENVAT Credit taken on the said capital goods reduced by 2.5 per cent for each quarter of a year or part thereof from the date of taking the Cenvat Credit." Therefore, service provider has to raise an invoce for removal of capital goods. I think an invoice which is used for the purpose of provision of services would be sufficient to show the details of removal of capital goods and reversal of credit thereon. On the other side, you need to ascertain the provisions of VAT also. If you require to pay VAT, indeed, you need to prepare a commercial invoice. And I think it would solve the purpose.

AI Summary

CENVAT credit reversal required on removal of capital goods, with statutory periodic reduction and invoice documentation expected. Reversal of CENVAT credit is required when capital goods on which credit was taken are removed; the provider must remit an amount equal to the CENVAT credit claimed reduced by the prescribed periodic reduction measured from the date of taking the credit. An invoice documenting removal is required and an invoice used in providing services may suffice, though a commercial invoice may be needed where VAT implications arise.