AMOUNT TO BE PAID BY THE MANUFACTURER ON REMOVAL OF INPUTS AND CAPITAL GOODS

As per Rule 3(5) and Rule 3(5A) as amended w.e.f. 17-03-2012, of the Cenvat Credit Rules, 2004, where a manufacturer of final product or a provider of output service removes any inputs or capital goods from his factory/premises, then he shall be liable to pay an amount calculated as follows:-

CASE I

INPUTS REMOVED AS SUCH [RULE 3(5)]

If the inputs on which cenvat credit has been availed are removed as such, the manufacturer or provider of output services shall pay an amount equal to the Cenvat credit availed in respect of such inputs.

CASE II

CAPITAL GOODS REMOVED AS SUCH [RULE 3(5)]

If the capital goods on which cenvat credit has been availed are removed as such, the manufacturer or provider of output services shall pay an amount equal to the Cenvat credit availed in respect of such capital goods.

CASE III

CAPITAL GOODS REMOVED AFTER BEING USED WHETHER AS CAPITAL GOODS OR AS SCRAP OR WASTE [RULE 3(5A)]

If the capital goods on which Cenvat credit has been taken are removed after being used, whether as capital goods or as scrap or waste, the manufacturer or provider of output services shall pay an amount equal to the Cenvat credit taken on the said capital goods reduced by the certain specified percentage points for each quarter of a year or part thereof from the date of taking the Cenvat credit.

In other words, if the capital goods are removed after being used, whether as capital goods or as scrap or waste, the manufacturer or a provider of output services shall pay an amount as follows:-

Higher of the following two (i) or (ii)

(i)                  Amount of Cenvat Credit taken

Less: The following percentage points calculated by straight line method for each quarter of a year or part thereof from the date of taking the Cenvat Credit-

(a)    For computers and computer peripherals:

For each quarter in the first year @10%;

For each quarter in the second year @8%;

For each quarter in the third year @5%; and

For each quarter in the fourth and fifth year @1%

(b)   For capital goods other than computers and computer peripherals:

@2.5% for each quarter.

(ii)                Amount equal to the duty leviable on transactional value of  such capital goods

 

This Article has been Shared by Student of ICAI Palak Aggarwal. She can be reached at aggarwal.palak2809@gmail.com