Cenvat on capital goods

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

09 June 2012 A fire has occurred in factory as a result of which many of input & capital goods have been distryoed. Some of Capital and input goods were sold as scrap, others were repaired and continued to be used

Now my question is:-

Whether Cenvat credit taken on capital goods is required to be reversed?, if yes whether on all capital goods or only goods sold as scrap

What about reversalon inputs

WHAT IS HE RATE AND DUE DATE OF REVERSAL OF SUCH CREDIT.

Dayal

Dayal (Expert)
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09 June 2012 There are judgments which clarify reversal is not warranted in case of capital goods destroyed by fire andreimbursed by insurance company. Regarding clearance of capital goods as scrap duty to be reversed as such by reducing 2.5% per quarter or on basis of transaction value which ever is higher

rajula gurva reddy

rajula gurva reddy (Expert)
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09 June 2012 As long as the Capital goods are available in the factory even after fire accident in whatever condition they may be, there is necessity to reverse the Cenvat Credit. However, whenever the same is sold as scrap, Cenvat Credit has to be reversed.

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NILESHKUMAR

NILESHKUMAR (Expert)
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09 June 2012 As per Rule 21 of CE Rules, 2002 where it is shown to the satisfaction of the Commissioner that -

· Goods have been lost or destroyed by natural causes, or

· Goods have been lost or destroyed by unavoidable accident, or

· Goods are claimed by the manufacturer as unfit for consumption or for marketing,

at any time before removal, he may remit the duty payable on such goods, subject to such conditions as may be imposed by him by order in writing.

Earlier there were contrary views in respect of Cenvat provisions in case of remission of duty. With the insertion of the sub rule 5C to the Rule 3 of the Cenvat Credit Rules, 2004, this controversy has been put to rest.

From now, it has been provided that, "Where on any goods manufactured or produced by an assessee, the payment of duty is ordered to be remitted under rule 21 of the Central Excise Rules, 2002, the CENVAT credit taken on the inputs used in the manufacture or production of said goods shall be reversed."

For more details please chapter no. 30 of Central Excise Practice Manual.

For Capital Goods, as you have mentioned in your query the same has been repaied and reused in your factory- no need to reversal for capitalgoods being reused.

Thanks
NILESHKUMAR BANKER
B.COM, LLM, MBA FINANCE , CWA
ADVOCATES AND CONSULTANTS,
C. EXCISE, CUSTOMS, SERVICE TAX AND EXPORT IMPORT