Treatment of the cenvat credit in case of removal of capital asset from the premises of the manufacturer of the final product can be explained in the following manner;
- When the capital goods are removed as such When the capital goods on which cenvat credit has been taken are removed as such from the factory of the manufacturer of the final product the following compliances, inter alia, are required to be made ;
- Such removal should be under the cover of invoice i.e. an invoice should be raised as enumerated under the provisions of Rule 9 of Central Excise Rules.
- The manufacturer is required to pay an amount which is equal to the credit availed in respect of such capital goods.
- Cenvat credit may be utilized for the payment of such amount as per Rule 3(4) of Cenvat Credit Rules.
- When the capital goods are removed after use When the capital goods on which cenvat credit has been taken are removed after being used. Point a deal with a situation where capital goods are removed as such by implication it means without use such goods. Whereas point (b) deals with a situation where capital goods are removed after use in the premises of the producer of the final product;
- Such removal should be under the cover of invoice. Apart from the other requirements such invoice must mention properly the details of purchase of such capital asset as well as the date and amount of cenvat credit taken.
- The manufacturer shall pay an amount equal to the cenvat credit taken on the said capital goods reduced by the % points calculated by the straight line method ,for each quarter of the year or part thereof from the date of taking the cenvat credit
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%
For each quarter in the Fourth and Fifth Year @1%
For other capital goods other than computers
@ 2.5% for each quarter
When capital goods are cleared as waste & scrap
- In such cases an invoice will required to be issued for the removal of such waste & scrap.
- The manufacturer shall pay an amount equal to the duty leviable on transactional value.
- When capital goods written off in books of accounts before being put to use
When capital goods on which cenvat credit has been taken is written off fully in the books of account. This may occur where asset is destroyed completely because of fire or natural calamity etc.
- The asset was not put to use
- In such cases manufacturer shall pay an amount equal to the cenvat credit taken.