Capital Goods removal after 10 years usage to our Own unit II - under excise invoice with zero duty

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  1. Nikil Mohan

    Nikil Mohan Member

    We removed one capital goods ( Machine) to our own Unit , Unit 2 ( ie. from Unit 1 to Unit 2 ) . The said machine is more than 10 years from the date of credit taken . Hence we cleared this CG under our excise invoice with a value of 5 lacs and in the invoice we printed more than 10 years & no duty applicable .Not for sales /stock transfer only. Now audit raised audit point , that because the value is indicated in the Excise Invoice we need to pay duty even though the life of said CG more than 10 years the value to be treated as transaction value & duty to be paid. Sir, is it correct ?
  2. Chandrashekar M

    Chandrashekar M Active Member

    If you remove the capital goods used for 10 years or more the credit availed is to be reduced @ 2.5% per quarter of use and the same will be 100% after 10 years. Therefore when you remove the capital goods after using the same for 10 years according rule rule 3 (5A) of Cenvat Credit Rules, 2004 the cenvat credit to be reversed will be nil. However when you transfer the used capital goods to your unit II you will show the value of the used capital goods in the transport documents for your accounts purpose. According to proviso to rule 3 (5A) (a) "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". Here the transaction value will be the value shown by you in the document by whatever name it is called will be transaction value and you have to pay duty on that value. Since unit II can take the credit of duty paid by your unit I this is a revenue neutral situation. Hence the audit objection in my view, is sustainable.
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