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Two issues of removal of inputs and Capital goods and reversal of credit

Cenvat Credit - By: - Himansu Sha - Dated:- 6-3-2017 - It is usual that the inputs and capital goods are removed by the assessees on which they have availed Cenvat credit on many occasions. May be the inputs or the capital goods after receipt or after use are no longer required by them and need to be disposed. In such type of situations the assessees resort to the procedures prescribed under the provisions of Rule 3(5) of the Cenvat Credit Rules,2004. Some issues emerge while dealing with such s .....

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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 : Provided that such payment shall not be required to be made where any inputs[or capital goods are removed outside the premises of the provider of output service for providing the output service : Provided further that such payment shall not be required to be made where any inputs are removed outside the factory for providing free warranty for .....

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st year @ 10% for each quarter in the second year @ 8% for each quarter in the third year @ 5% for each quarter in the fourth and fifth year @ 1% (ii) for capital goods, other than computers and computer peripherals @ 2.5% for each quarter : 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. (b) If the capital goods are cleared as waste and scrap, the ma .....

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of the input service credit . It has been a contentious issue as to whether the input service credit needs reversal or not. Under such a circumstance the provisions of Rule 3(5), cannot be read in isolation and the same have to be read harmoniously with the other provisions like Rule 2(l), 2(h) and 3 of the Cenvat Credit Rules,2004. Rule 2(l) of the cenvat Credit Rules defines Input service as any service used by a provider of taxable service for providing an output service; or used by a manufac .....

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visions, would be that input services to be eligible for credit, needs to be used for manufacture of final product. When the inputs are no longer available for manufacture of the final product, there is no question of the input services being used for the intending purpose which make them eligible for credit. Moreover the word business has been deleted from the ambit of the Rule 2(l) of the Cenvat Credit Rules,2004. Hence it is clear that the credit will have to be reversed when the associated i .....

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des that if the amount so calculated by the above method 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. The transaction value as provided under Section 4(3)(d) of the Central Excise Act,1944: transaction value means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on be .....

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