Leviability of duty on capital goods cleared after being put into use for over 10 years – CBEC clarifies

By Vijay Kumar

CBEC clarifies that in view of specific provisions under Rule 3(5A) of the CENVAT Credit Rules, 2004, if the capital goods, on which CENVAT credit has been taken, are cleared as waste and scrap, even after a period of 10 years, an amount equal to the duty leviable on the transaction value for such capital goods cleared as waste and scrap, would be payable.

But Proviso to rule 5 reads as,

Provided also that if the capital goods, on which CENVAT Credit has been taken, are removed after being used, the manufacturer or provider of output service shall pay an amount equal to the CENVAT Credit taken on the said capital goods reduced by 2.5 per cent for each quarter of a year or part thereof from the date of taking the Cenvat Credit.

So if the capital Goods are removed after ten years, there is a 100% deduction, but now the Board clarifies that if they are removed as scrap, duty on the transaction value has to be paid.

Moral of the story: Don't remove them as scrap – but remove them as such!

CBEC F.No.267141/2009-CX8 Dated: December 07, 2009