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Excise duty on scrap

krishna iyer (Sr.Finance Manager) (197 Points)

17 September 2011

Kindly clarify excise duty applicability on following situations-

a)steel sheets/angles sold as scrap - no cenvat credit taken at the time of purchase being ineligible items.

b)items sold as scrap - cenvat credit taken at the time of purchase

c)unique spares bought alongwith original machinery- machinery has become obsolete- unique spares not used-

unique spares sold as scrap (please note unique spares not used)- cenvat credit taken at the time of purchase

whether ed is payable on scrap sale irrespective of cenvat credit taken at the time of purchase or not/

kindly clarify

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6 Replies

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 17 September 2011

before discussion, it should be clear that what is status of unit , availing 8/2003 or paying duty?

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krishna iyer (Sr.Finance Manager) (197 Points)
Replied 18 September 2011

we are a manufacturing unit clearing products paying duty.

steel and other items are procured for construction of storage tanks/structural supports etc.

since steel is used for storage tanks, which Dept may treat treat as immovable property(embedded to earth), we are not availing cenvat. credit on steel

since cenvat credit is not taken, while selling steel scrap, after demolition of tanks) , duty is payable

Preety Parik (chartered accountant) (762 Points)
Replied 18 September 2011

For items mentioned in b and c, collect excise duty on basic value of sales amount of scrap.
Since Cenvat was not claimed for items mentioned in point a excise duty need not be collected on sales.

SOMAN N L (Manager (Finance) - Excise & Customs) (24 Points)
Replied 04 October 2011

Rule 3(5A) of Cenvat Credit Rules 2004 says, "If capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value".

Hence, queries at (a) & (b) , does not make any difference whether Cenvat has been availed or not at the time of purchase. Since the law does not differenciate between Cenvat availed materials and the not availed, for the above rule, ED has to be paid on the transaction value.

However, a different view was taken by some experts that since Cenvat Credit Rules is applicable for Cenvat availed materials, above rule 3(5A) does not apply on non-cenvatable items.

Readers may pls respond.

Rule 3(5B) says, if unique spares are written off or provision created in books, ED equivalent to Cenvat credit taken has to be paid.

Soman NL, Manager Finance, BPCL - Kochi Refinery

1 Like

CA Nitin Karmalkar (Senior Associate) (70 Points)
Replied 14 October 2011

Respected Sir,

If we look in to definition of Capital goods it incluide Storage tank as CG. So you can avail cenvat credit on the same subject to same is utilised for manufacturing purpose.

2. Definitions. - In these rules, unless the context otherwise requires,-

(a) "capital goods" means:-

(A) the following goods, namely:-

(i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading No. 68.05 grinding wheels and the like, and parts thereof falling under heading 6804 of the First Schedule to the Excise Tariff Act;

(ii) pollution control equipment;

(iii) components, spares and accessories of the goods specified at (i) and (ii);

(iv) moulds and dies, jigs and fixtures;

(v) refractories and refractory materials;

(vi) tubes and pipes and fittings thereof; and

(vii) storage tank,

used-

(1) in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in an office; or

(2) for providing output service;

Regards,

Nitin Karmalkar

M.No.9822610852

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UMESH AHIR (Part Time Accounting Job Seeker) (41 Points)
Replied 06 June 2012

we manufactures the container used for carrying the proccessed, semi- proccesed,& finished goods and takes the cenvat credit for purchasing thr raw material , so i want to know that on making the sale of scrap should we charged the duty on sale of scrap or not.