CENVAT on Capital Goods

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This query is : Resolved

Vijayaganesh Sampathkumar (Querist)

28 July 2008 Dear Sir,

I have the following query regarding CENVAT on capital goods. If someone can clarify, that will help.

Suppose i receive Capital Goods, each worth Rs.10000 and having Excise duty of 1000. I receive two such machines. So the total value is Rs.20000 and total excise duty is 2000 (in a single invoice). Now, i avail 50% Cenvat credit on these machines. SO i avail 1000 as cenvat credit and 1000 is available for claim during the next year.

Now, before using these machines, i realize that the machines are defective. SO i want to return this back to the vendor (both the machines).

Since i am removing the capital goods "AS SUCH", i reverse the credit i availed for rs.1000. Now, i have to prepare an excise invoice for moving this back to the vendor. In this excise invoice, i would be showing Rs.2000 as Excise Duty (for both the machines). Now, the issue is this:

The debit in my CENVAT register for such removal would reflect as Rs.1000 (being equal to the credit that i had availed). However, my excise invoice will show that as Rs.2000. Is this alright? Will excise authorities object to this?

If this is not correct, what is the excise duty that i should show on my excise invoice? What is the amount of debit that will appear in my Cenvat register?

If anyone of you could clarify, i would really appreciate it.

Thanks / Vijay