Reversal of CENVAT Credit on clearance of Capital Goods as such - Revenue Neutrality - Audit Frowns
CAG's Audit observes:
Rule 3(5A) of CENVAT Credit Rules, 2004 provides that if capital goods on which CENVAT credit has been taken, are removed after being used, the manufacturer or provider of output services 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 CENVAT credit. However, 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 .
Audit found that:
An assessee in Ludhiana Commissionerate, engaged in the manufacturing of auto parts/motor vehicle parts, transferred used machinery for Rs.12.79crore to its own unit in Noida during the year 2012-13, by paying excise duty of Rs.113.77 lakh instead of Rs. 158.03 lakh leviable on transaction value. This resulted in short payment of duty of Rs. 44.26 lakh.
Department did not agree and observed that had the assessee paid the higher duty, the other unit would have availed the higher credit and that the entire exercise would have been neutral. The Department also referred to certain Tribunal citations in support. - 2012-TIOL-1578-CESTAT-BANG.
But Audit is not convinced because as per provision of 3 (5A)(a)(ii) of CENVAT Credit Rules, 2004 if the amount calculated is less than the amount equal to duty leviable on transaction value, the amount to be paid shall be equal to the duty leviable on transaction value.
Audit also pointed out that CBEC has not issued any instructions based on the cited Tribunal decisions to guide assessees as well as adjudicating officers in similar situations.
Will the Board issue a circular now?
Source: CAG's Report No.33 of 2014