Removal of idle machinery to one more plant without duty

This query is : Resolved

g sreenivasulu (Querist)
Follow

18 July 2013 DEAR EXPERTS, WE ARE HAVING MACHINERY IN PLANT 1, WHICH IDLE, OCCUPYING SPACE.

NOW, WE WANT TO REMOVE THIS MACHINERY TO PLANT 2, WHERE NO OPERATIONS, HUGE SPACE IS AVAILABLE.

NOW, BOTH THE PLANTS ARE HAVING SEPARATE EXCISE REGISTRATION.

WILL YOU PLEASE TELL ME, IS THERE A WAY OUT, THAT WE CAN MOVE THE MACHINERY FROM PLANT 1 TO PLANT 2 WITHOUT PAYING THE DUTY.

CA Kumar Mukesh

CA Kumar Mukesh (Expert)
Follow

18 July 2013 As per Cenvat Credit Rule 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

Further 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

Therefore its mandatory to charge Excise Duty in case removal of plant & Machinery, However Receiving plant can claim Cenvat as normally.

RENGARAJ R.K

RENGARAJ R.K (Expert)
Follow

18 July 2013 I agree with the expert. Plant 2 can very well avail the CENVAT benefits by cover of plant 1 excise invoice. What is the age of the machinery and have you utilised the cenvat of the said machinery in plant 1?

Upgrade to CAclubindia Pro. Subscribe Now!

g sreenivasulu

g sreenivasulu (Querist)
Follow

20 July 2013 POSSIBILITY:

Please note, based on the life expectancy of the machinery, there is a possibility of declaring it as obsolete and old machinery. This will be valued at that time at a nominal value and only nominal duty will be payable (SCRAP VALUE).

In order to arrive at this value, we will be needing what was the original date of procuremenT. Also a techincal certificate stating the correct life expectancy of the machinery.

I WOULD BE GRATEFUL IF THE EXPERTS CONFORM THIS VIEW IS CORRECT OR NOT.

CA Kumar Mukesh

CA Kumar Mukesh (Expert)
Follow

20 July 2013 In all cases whether or not machine is removed as Scrap otherwise, Excise duty is always liable to pay. For instance

A Machinery was purchased at Rs. 112000/- on 1/4/12 inclusive of Excise Duty of Rs. 12000/- and same was removed on 1/10/2013 at Rs. 10000 (scrap)/100000 (as such)

i) Case sold at Rs. 10000/-
Excise duty liable to charge
=12000-1200 (6000*2.5%*4 (1st year dep.)+6000*2.5%*2 (2nd year dep. for two qtr)+6000*2.5%*2 (2nd year dep for 2 qtr)
=10800

Invoice Value: 10000(Sale value)+10800(Duty)= 20800

ii) Case sold at Rs. 100000/-

Duty liability higher of
Duty at transaction value 12000
or
duty as per 1st case 10800

Invoice Value 100000(Sale Value)+12000(Duty)=112000

g sreenivasulu

g sreenivasulu (Querist)
Follow

20 July 2013 SEE, SIR, IN THIS CASE, THE MACHINERY IS MORE THAN 10 YEARS OLD, NOW IT IS VERY OLD AND OBSOLETE, THIS WILL BE TREATED AS A SCRAP, SO BOOK VALUE IS NIL, THEN, IF THE MACHINERY IS REMOVED AND TRANFERED TO ONE MORE UNIT ON INTER UNIT TRANSFER BASIS, ONLY NOMINAL SCRAP VALUE IS DECLARED AND DUTY WILL BE PAID ON THAT, KINDLY CONFORM, IF THIS IS CORRECT PROCEDURE, AND EXCISE LAW IS COMPLIED WITH, THANKS & REGARDS, SREENIVASULU

CA Kumar Mukesh

CA Kumar Mukesh (Expert)
Follow

20 July 2013 You may be correct, However you have to ensure that Excise Duty should be less than as amt calculated in my last post.
If further clarification needed please let me know at camukeshkumar@consultant.com with detailed working

g sreenivasulu

g sreenivasulu (Querist)
Follow

20 July 2013 FINE THANKS SIR, I WILL MAIL YOU THE CORRECT WORKINGS, THANKS & REGARDS, SREENIVASULU

Upgrade to CAclubindia Pro. Subscribe Now!