Unutilised cenvat credit on CG after DTA to EOU conversion

[Rahul Sonawane]

Dear All,

We have converted our exising DTA unit into EOU. We have unutilised cenvat credit on capital goods lying with us on  the date of DTA to EOU conversion,  my query is that whether we can utilize this unutilised credit after conversion for payment of Excise duty on DTA sales.

 

Rahul Sonawane

 

[Vijay kumar]

Rule 10 of Cenvat Credit Rule, 2004 specify that - If a manufacturer of the final products shifts his factory to another site or the factory is transferred on account of change in ownership or on account of sale, merger, amalgamation, lease or transfer of the factory to a joint venture with the specific provision for transfer of liabilities of such factory, then, the manufacturer shall be allowed to transfer the CENVAT credit lying unutilized in his accounts to such transferred, sold, merged, leased or amalgamated factory.". If your case falls in any of these categories, the credit can be transferred,subject to fulfilment of Rule 10(3). If not, it shall be a case of Rule 3(5) ibid whereby used capital goods on which credit has been taken have to be removed on payment of duty after allowing for proportionate depreciation. If it comes to 100% depreciation, then the case would be covered under Rule 3(5A) ibid. The duty paid in the DTA can be availed as credit by EOU and can be utilized for payment on DTA sales by the EOU.

[Alok Kumar]

Dear Mr. Rahul ,

 I personally feel you have converted yoru existing unit into an EOU , without changing your present location.

If that is the case then the calcultaion of duties of excise and customs will be altogether different .

Please clarify your position so that i can give you some feedback on the issue

thanks,

alok kumar

[Rahul Sonawane]

Dear Mr.Alok Sir,

Our Present location is same.

 

[Alok Kumar]

Dear Mr Rahul,

In view of the existing FTP/ FT Procedures you will not be able to to claim cenvat credit availed on capital goods as lying in your records on the date of conversion and the same will lapse and cannot  be utilsed by you.

The CBEC has already clarified this view in one of  its circular .

you query is being replied accordingly.

 

thanks,

 

alok kumar

AI Summary

Cenvat credit on capital goods may be non-transferable on DTA-to-EOU conversion unless statutory transfer conditions are met. Unutilised cenvat credit on capital goods on conversion from DTA to EOU is transferable only when the conversion meets prescribed transfer criteria such as factory shift or change of ownership; otherwise the capital goods must be removed on payment of duty after allowing depreciation or dealt with under the fully depreciated goods provision. Duties paid in the DTA can be availed as credit by the EOU and used for DTA sales. Practical commentary indicates that conversion at the same location under prevailing foreign trade procedures may cause such cenvat credit to lapse.