Reversal of Cenvat credit

This query is : Resolved

Amar Agarwal (Querist)
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22 November 2008 Dear friends,
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?

Ravikumar.G

Ravikumar.G (Expert)
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22 November 2008 Where the capital goods are cleared as waste and scrap the manufacturer is required to pay an amount equal to the duty leviable on transaction value of such waste or scrap.