Excise duty on Capital Goods and Depreciation

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Rajesh Bajaj (Querist)
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13 November 2007 Dear Sir

As per Following Example

Basic Value 100
Excise duty 16
Total 116

Now we want to clarify if we take modvat of Rs 16 and Depreciation on Basic Value Rs 100 Is it Correct as per excise Rules 4(4)
please tell us in detail
Thanks in advance

my Email id is rajesh_bajaj1234@rediffmail.com

CA. Ramesh P Choudhary

CA. Ramesh P Choudhary (Expert)
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13 November 2007 Yes, ur calculation is correct.
The CENVAT credit in respect of capital goods shall not be allowed in respect of that part of the value of capital goods which represents the amount of duty on such capital goods, which the manufacturer claims as depreciation under section 32 of the Income-tax Act, 1961( 43 of 1961).

The CENVAT credit in respect of capital goods received in a factory at any point of time in a given financial year shall be taken only for an amount not exceeding fifty per cent. of the duty paid on such capital goods in the same financial year:

Provided that the CENVAT credit in respect of capital goods shall be allowed for the whole amount of the duty paid on such capital goods in the same financial year if the said capital goods are cleared as such in the same financial year.

The balance of CENVAT credit may be taken in any financial year subsequent to the financial year in which the capital goods were received in the factory of the manufacturer, if the capital goods, other than components, spares and accessories, refractories and refractory materials and goods falling under heading No. 68.02 and sub-heading No. 6801.10 of the First Schedule to the Tariff Act, are in the possession and use of the manufacturer of final products in such subsequent years.

Illustration.- A manufacturer received machinery on April 16, 2006 in his factory. CENVAT of two lakh rupees is paid on this machinery. The manufacturer can take credit upto a maximum of one lakh rupees in the financial year 2006-2007, and the balance in subsequent years.

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