CX - Inputs or Capital Goods Cleared as such - Reversal of CENVAT Credit - CAG wants Rule to be amended

By Vijay Kumar

THE CAG in its latest report on Central Excise presented to Parliament on Tuesday observed,

As per rule 3(5) of the Cenvat Credit Rules, 2004, when input or capital goods on which Cenvat credit has been taken, are removed as such from the factory, the manufacturer of final products shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in rule 9. However, there is no provision for reversal of proportionate Cenvat credit of input services at the time of clearance of inputs/capital goods as such .

So the CAG has suggested that:

Board may consider incorporating suitable provisions in Cenvat Credit Rules, 2004 requiring reversal of proportionate credit attributable to input services at the time of clearance of inputs or capital goods as such.

Let us hope the Board doesn't embark upon any such misadventure, which would make life more miserable for the assessee, and the revenue earned will not cover the cost of even one audit report.

And the CAG does not suggest how to quantify the proportionate credit.