Inter unit transfer of capital goods

[shaji thomas]

What will be the transaction value and duty involvement  when we transfer capital goods from one unit to another(sister concern)  after using the same for more than ten years.

[YAGAY andSUN]

You would need to pay Central Excise Duty on the Transaction value of the capital goods.

[YAGAY andSUN]

Further, if such capital goods are not removed as waste and scrap and it is capable to manufacture finished goods, then no need to pay the Central Excise duty.

[Dilip Darji]

Dear sir.

Please refer Sub-rule 5 of Rule 3 of CENVAT Credit Rules, 2004.

(5) When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, or premises of the provider of output service, the manufacturer of the final products or provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in rule 9:

Provided that such payment shall not be required to be made where any inputs or capital goods are removed outside the premises of the provider of output service for providing the output service :

Provided further that if the capital goods, on which CENVAT Credit has been taken, are removed after being used, the manufacturer or provider of output services shall pay an amount equal to the CENVAT Credit taken on the said capital goods reduced by the percentage points calculated by straight line method as specified below for each quarter of a year or part thereof from the date of taking the CENVAT Credit, namely:-

(a) for computers and computer peripherals:

for each quarter in the first year @ 10%

for each quarter in the second year @ 8%

for each quarter in the third year @5%

for each quarter in the fourth and fifth year @1%

(b) for capital goods, other than computers and computer peripherals @ 2.5% for each quarter.

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This indicates that if the Capital Goods are more than 10 years old, you need to pay anything. Onus lies on you to prove that Capital Goods were purchased before 10 years. This applicable even for removal to sister concern also.

Regards.

DILIP DARJI.

[Mahir S]

Yes, i also agree.... However, it would be advvisable to get a Valuation certifiate from a Chartered engineer and acordingly therafter sell the machinery..

[Guest]

 

There is no need to pay the Central Excise duty after using the same for more than ten years

AI Summary

Inter unit transfer of capital goods: CENVAT adjustment applies but is reduced by prescribed depreciation, possibly eliminating liability after long use. When capital goods on which CENVAT credit was availed are removed from the factory, the manufacturer must pay an amount equal to the credit availed, reduced by prescribed straight-line quarterly depreciation rates; after prolonged use the cumulative reduction may eliminate the payable adjustment. The transfer must be made under the prescribed invoice, and the transferor bears the burden of proving the goods' age to claim reduced liability.