Payment of duty on clearance of machinary

[rajkumar shukla]

Dear sirs,

In case of clearance of cenvatted old and used machinary after 10years i.e. after its depreciated value becomes zero ,how the cenvat is to be reversed and invoice prepared.As per rule 3 (5A) ,if the capital goods are cleared as waste and scrap, amount equal to duty leviable on transactional value is to be paid. Is invoice to be prepared showing it as waste and scrap or wornout machinary?

[Rahul Sonawane]

Dear Raj,

If you are clearing  the capital goods as such than you need to reduce the cenvat availed, by 2.5% per quarter from the date of receipt/Installation of Machine,  and if you are selling the Machine as a waste & scrap you need to pay the duty on Transaction value.

 

[rajkumar shukla]

I have already specified that the machinary is 10 years old.meaning thereby after reducing it by 2.5% per quarter, it becomes zero. How the cenvat is to be reversed.? normally no credit would be required to be reversed. However if examined in light of above mentioned rule, amount is to be paid.   How the invoice is to be prepared. will it be waste and scrap or will it be machinary which has worn out?

[Rahul Sonawane]

Dear Sir,

That is what i have mentione below ,  how to prepare Invoice is depends on, what you going to sell whether as a  Machine or as a scrap.

 

[YAGAY andSUN]

If the machine is in the working condition and your customs will use it for manufacturing of final product, then, there is no need to pay duty on the transaction value since the Rule 3 (5A) comes into the picture if the machine is being removed as waste and scrap.

Further, you must mention on the invoice that machine is more than 10 years old and is in working condition. One more precaution you would have to take that machine should not be dismantled.

 

[rajkumar shukla]

DOES THAT MEAN DUTY IS DEPENDENT OF PROFILE OF CUSTOMER/END USE?

[YAGAY andSUN]

Yes, if the machine is capable to manufacture final products then there is no requirement to pay the duty on the transaction value as the machine has not been scrapped.

AI Summary

Duty on clearance of used machinery depends on whether it is sold as scrap or as a working machine; end use affects liability. Clearance treatment turns on characterization: if capital goods are cleared as waste and scrap, duty is payable on the transaction value under Rule 3(5A). If sold intact as functioning machinery, cenvat must be reduced by the prescribed periodic depreciation adjustment from the date of installation until credit is exhausted. The invoice should state whether the item is scrap or a used working machine (not dismantled) and may note age and condition. Duty liability depends on the factual end use by the purchaser.