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Slump Sale Agreement

Kiran Shinde (Accountant) (46 Points)

21 June 2010

Dear All,

Indian Company has transferred its business of Manufacturing business from Own Compnay to New Joint Venture Company thru slump sale agreement. Indian company is 50% partner. Indian Company wants to transfer the Stock from indian company to new Joint venture company.

Please let me know, how to transfer the stock and pass on the CENVAT benefit to JV company. Can we raise Invoice in such Case for transfer of Material?

Its a transfer of business from One company to another. Please guide and let me know the procedure to settle the Excise matter in Indian Company like Transfer of CENVAT Credit, Surrender of Excise Registration. Can I apply in new JV company as New Registration for Central Excise or I have to inform Central Excise about Transfer of Business from One company to another.

thanks & regards

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5 Replies

Sanjay Dwivedi (Advocate & Consultant) (143 Points)
Replied 22 June 2010

You can transfer the inputs (as such or in process) and the capital goods without payment of duty in terms of Rule 10 of Cenvat Credit Rules, 2004. The rule permits transfer of credits if the inputs and capital goods are also transferred to the satisfaction of divisional AC/DC.

1 Like

Kunal Makwana (Partner) (29 Points)
Replied 27 December 2010

Dear Sanjayji,

Thank you for your valuable input.

I would also like to ask something related to my friend Mr. Shinde's question on the slump sale. We are in the process of transferring our business to a new JV, in which we have a share holding of less than 50%.

We shall also be transferring the assets (land, building and machinery) to the new JV through a normal or Slump sale (yet to be verified, which is more efficient), so what all types of taxes will we be supposed to pay? Some them that I "Feel" are Capital gains, VAT, Excise (I dont know)??

Also, in our existing company we have a lot of CENVAT Credit, and what would happen to it?? Will we be able to claim it in the new JV?

Thanks in advance for the positive response.

Regards

Sanjay Dwivedi (Advocate & Consultant) (143 Points)
Replied 27 December 2010

I am not aware of the position under VAT or Income Tax laws. Cenvat Credits (on input, capital goods, input services) can be transferred to the new JV under rule 10 referred in my reply above.

1 Like

Kunal Makwana (Partner) (29 Points)
Replied 27 December 2010

Thank you once again Mr. Sanjay.

I shall consult our VAT consultant for other queries.

Kiran Shinde (Accountant) (46 Points)
Replied 28 December 2010

Dear Mr. Makwana,

Related to VAT credit, you will have to reverse the same if you are transferring the Inventory to New JV Company. also the proofs are to be kept ready likes related purchase Invoices during VAT Audit. you may charge VAT to the New JV Company and receive the amount (VAT Credit) which you have reversed and charged to the new JV. Also New JV can claim credit against the said transfer and keep the records for assessment.

Regards

Kiran Shinde