A) If an authorised dealer sells a demo car on which input tax credit (including Compensation Cess) was availed, then at the time of sale under Section 18(6), should the credit availed under Cess be computed as per Rule 44, or should Cess be charged directly on the value of supply?
B) Both Rule 40(2) and Rule 44(6) deals with determination of remaining input tax credit at the time of supply of capital goods. In such a case, which rule is applicable?
Whether cess on demo car sale must be computed under Rule 44 with Section 18(6) or charged on supply value An authorised dealer's sale of a demo car on which input tax credit (including compensation cess) was claimed raises whether cess must be computed via Rule 44 at the time of supply under Section 18(6) or charged on the supply value. Respondents note Section 18(6) and Rule 44(1)(b) require reversal of ITC for capital goods held under five years, while Rule 40(2) is used to calculate ITC attributable to business use; both provisions apply and may yield differing reversal amounts. One view suggests reversing the lesser (beneficial) amount; another contends cess remains payable where ITC was earlier availed despite notifications exempting cess on used vehicles. (AI Summary)
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