CENVAT QUERY

This query is : Resolved

Dhruvesh Shah (Querist)
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21 November 2008 Please provide your inputs respect of reversal of Cenvat credit, availed on capital goods, at the time of retirement of asset: Case1: Capital Asset (useful life 4 years) is retired within 1 year of its acquisition? Case2: Capital Asset (useful life 4 years) is retired after 2 years but less than 4 years? Case3: Capital Asset (useful life 4 years) is retired after its useful life i.e. 4 years? As per second proviso of Rule 3(5) of Credit Rules: "Provided also that 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". What will be impact of this proviso in above mentioned cases?

Arbind Aggarwal

Arbind Aggarwal (Expert)
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22 November 2008 Cenvat credit has to be reversed as per the rule i.e.@2.5% per quarter of use and life of the machine (if within 10 years)sale value or book value is not relevant.