Latest Expert Exchange Queries

GST Demo Service software link: https://ims.go2customer.com
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft info@binarysoft.com
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
 
 
 
 
Popular Search: ARTICLES ON INPUT TAX CREDIT IN VAT :: VAT RATES :: TAX RATES - GOODS TAXABLE @ 4% :: ACCOUNTING STANDARD :: due date for vat payment :: empanelment :: cpt :: VAT Audit :: articles on VAT and GST in India :: TDS :: Central Excise rule to resale the machines to a new company :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: list of goods taxed at 4% :: form 3cd :: ACCOUNTING STANDARDS
 
 
Customs and Excise »
 Refund of IGST paid on export of goods under rule 96 of CGST Rules,2017
 Customs And Central Excise Drawback – Part II
 Customs Valuation (Determination of Value of Imported Goods) Rules 2007
 Amendment to Customs Valuation Rules – Notification No. 91/2017 (NT)
 GST on Custom House Agents
 The Customs and Central Excise Duties Drawback Rules, 2017 and All Industry Rates (AIRs) of Drawback related changes
 The Customs and Central Excise Duties Drawback Rules, 2017
 Man fleeing from Customs arrested
 Refund of amount on account of double-payment of Customs
 SC paves way for trial against RIL in 1987 excise evasion case
 GST: Govt sets up panel to receive profiteering complaints

CBEC clarifies how to treat Cenvat Credit
December, 21st 2009

The Central Board of Excise & Customs (CBEC) has clarified the treatment of Central Value Added Tax (Cenvat) Credit in respect of stocks of goods whose value is written off in the books of accounts.

It is not unusual that manufacturers are stuck with non-moving stocks of inputs such as raw materials and components, or semi-finished goods or finished goods due to change of models or change of processes or poor feedback from customers or obsolescence, etc. In such cases, the best accounting practices suggest writing off the value of such stocks in the books of accounts, instead of carrying their value in the books as assets. The stocks are not physically destroyed but retained in the hope that they can be put to better use at a suitable time.

CBEC has always taken a view that utilisation of Credit taken on inputs that have been written off for stock account purposes will amount to abuse of the scheme and that the Credit taken on inputs of such stocks must be reversed. But there was no legal back-up for such insistence.

This July, the government inserted Rule 3(5B) in the Cenvat Credit Rules, 2004, to provide that writing off the value of inputs and capital goods before putting them to use would entail reversal of the full Credit taken on them and that subsequent use of the inputs or capital goods would enable taking the Credit again. The latest Circular (number 907/27/2009-CX dated December 7, 2009) reiterates this position.

On the question of finished goods that are written off in the books of accounts, the CBEC says once the goods are manufactured, they become liable to excise duty payment unless the duty is remitted under Rule 21 of Central Excise Rules, 2002.

In case the duty is remitted, the Cenvat Credit on the inputs used in the manufacture of such finished goods must be reversed in accordance with Rule 3(5C) of Cenvat Credit Rules, says the Circular.

Otherwise, duty must be paid on these even if they are not cleared from the factory, says CBEC. This view needs better legal back-up.

Regarding stocks in process that are written off, the CBEC says that if the stocks have reached a stage, where they can be considered as manufactured goods, then they must get the same treatment as finished goods that are written off. Otherwise, they should be treated as inputs and reversal of Credit on the inputs must follow, says the Circular. A lot of unnecessary litigation can be avoided, if such views have better legal back-up.

In another somewhat suspect instruction (file number 267141/2009-CX.8 dated December 7, 2009), CBEC says that capital goods more than 10 years old, if cleared as waste and scrap, must suffer duty on the transaction value. This instruction is apparently in accordance with Rule 3 (5A) of the Cenvat Credit Rule, 2004. But, it confuses the real issue.

The question is whether any duty at all is payable if capital goods more than 10 years are cleared, not as waste and scrap but as usable capital goods. The answer is No, as the second proviso to Rule 3 (5) of Cenvat Credit Rules, 2004, allows on clearance of used capital goods a deduction of 2.5 per cent per quarter in the amount of Credit to be reversed.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Careers

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions