Reversal of credit

[Penumerthy Muralikrishna]

(1) A SERVICE PROVIDER availes 50% credit last FY, reaining 50% credit this FY on a C.G.. (2) He utilised full credit (by paying ST) in this FY (3) He closes his bussiness, surrenders RC certificate (4) His C.G. is now being utilised by another service provider Q:- What will be the revenue implication, whether credit already aviled is required to be reversed?

[Mukesh Kumar]

Your query need further details and detailed analysis. What is the status after surrender. Since he has closed the business, whether the machinery has been sold or business as such transferred. See rule 10 of CCR regarding transfer of cenvat credit. If you are not entitled to transfer of credit as per rule 10 and sold the machinery, indeed, there is a mandatory requirement of reversal of cenvat credit on capital goods.

AI Summary

Credit Reversal Required if Capital Goods Sold, Rule 10 of Cenvat Credit Rules Applies Post-Surrender. A service provider utilized 50% of credit last fiscal year and the remaining 50% this fiscal year. After using the full credit by paying service tax, the provider closed the business and surrendered the registration certificate. The capital goods are now used by another provider. The query concerns whether the already availed credit needs reversal. The response suggests further details are needed for analysis, particularly regarding the status post-surrender. If the business or machinery is sold and credit transfer is not permitted under rule 10 of the Cenvat Credit Rules, reversal of credit on capital goods is mandatory.