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Rule 3(5) of cenvat credit

AMEER SHA (Learner) (203 Points)

20 May 2012

Hello Friends,

This is regarding the applicability of rule 3(5) of CENVAT CREDIT RULES.We want to transfer a machinery after being used for one year. However we have not utilized or availed credit on the input tax on the same machinery but it still remains unutilized.My questioin is Do we need to reverse the credit as envisaged in Rule3 (5) ?. Can any one quote a case law (if any) if we do not have to reverse the input tax in this situation ?

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2 Replies

Anupreksha Thote (CA) (285 Points)
Replied 21 May 2012

You can utilize and avial credit of duty on machinery and then pay the duty as per rule 3(5) on removal of machinery after being used

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Sunil Kumar G (AGM Taxation) (373 Points)
Replied 25 May 2012

First Utilize the Un-utilzed credit and following the below procedure.

Removal of Capital Goods after put in to use: If the capital goods are removed after being used whether as capital goods or scrap or waste, the manufacturer shall pay an amount equal to the CENVAT Credit taken on capital goods reduced by the percentage points calculated by straight line method as specified below for each quarter of year or part there of from the date of taking the CENVAT Credit.

		Percentage
Sl. No	Descripttion	Computers	Others
1	For Each Quarter in the First Year	10%	2.50%
2	For Each Quarter in the Second Year	8%	2.50%
3	For Each Quarter in the third Year	5%	2.50%
4	For each quarter in the fourth and fifth year	1%	2.50%

Provided that if the amount so calculated is less than the amount equal to the duty leviable on transaction value, the amount to be paid shall be equal to the duty leviable on transaction value. (This rule is amended with effect from 01/04/2012)