Material removed w/o duty payment

[Asked by Guest]

R/sir, We have purchase Machinery on payment of duty but we have not taken credit on this due to misplace of invoice or elseware .After using this machine 5 years we had sale w/o payment of duty on ground that we had not taken credit on this . Please guide this is correct or not . Regards, SNEHAL SHAH

[Snehal Kulkarni]

Please note, according to the Rule 3(5) of Cenvat Credit Rules 2004,

"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;".

Since you have not avail the Cenvat Credit, you cannt use this formula for payment of duty.

But have to remember that, excisable goods to be clear on payment of duty only.

1. Either Take the Credit and remove as such

2. Or Declare machinery as Scrap and Pay the Duty on transaction value.

Note that merely saying that you are not eligible for payment of duty as you have not avail the Cenvat Credit is not sufficient.

ED to paid on removal of excisable goods.

 

[Snehal Kulkarni]

Please note, according to the Rule 3(5) of Cenvat Credit Rules 2004,

"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;".

Since you have not avail the Cenvat Credit, you cannt use this formula for payment of duty.

But have to remember that, excisable goods to be clear on payment of duty only.

1. Either Take the Credit and remove as such

2. Or Declare machinery as Scrap and Pay the Duty on transaction value.

Note that merely saying that you are not eligible for payment of duty as you have not avail the Cenvat Credit is not sufficient.

ED to paid on removal of excisable goods.

 

[RB SINGH]

I have seen the reply of Mr.Mangesh Lokre, in response to your query, but I wish to differ with him. Rule 3(5) of Cenvat Credit Rules 2004, do not come into play in your case since you have not availed the credit on the capital goods at the time of its receipt. Reversal of credit is required only when the credit has been availed and or utilized. In my view you are correct.

[Snehal Kulkarni]

Mr Singh

I agree with your contention.

But please note that you have to clear the goods on payment of duty only irrespective availment of cenvat credit.

Since the credit is not availed the provision of Rule3(5) doesnt attract to the present case. But still payment of duty is in question.

It is again advisable to pay the duty at the time of removal in order to avoid litigation.

 

 

AI Summary

Duty on removal of excisable goods: payment required on clearing machinery even if Cenvat credit was not availed.
Removal of excisable capital goods after use requires duty payment on clearance even if Cenvat credit was never availed; Rule 3(5) applies only where Cenvat credit has been taken and so cannot be used to justify duty-free removal. Options are to avail credit and follow the reversal mechanism on removal or declare the asset as scrap and pay duty on the transaction value; merely stating that credit was not availed does not relieve the duty obligation.