CENVET Credit

This query is : Resolved

Chandan (Querist)

01 March 2009 Hi,
Webought few Machines with opening balance of 500,000/- (50% of 10,00,000/-) in cenvet credit in first year. Have adjusted only 40,000/-by changing service tax on income generated from service rendered to different parties by these machine. In second years we added balance 50% i.e; 500,000/- with avalable total balance of (500,000-40,000)+500,000=9,60,000/-.In second year have total service tax liablity is 10,00,000/-.My query as below
1.Can we adjust total of 9,60,000/- in second year from 10,00,000/- from service tax which is earned from using these machine.
2. If we want to sale those maching what will hapen to avalable balance amount of PLA.
3. What will be the saling value of those machine if we want to sale those in start of second year.

SIDDHARTHA SANKAR ROY

SIDDHARTHA SANKAR ROY (Expert)

06 April 2009 What I could gather from your query is that you have availed 50% CENVAT credit(Rs 5,00,000/-) on capital goods in the first year which was utilised to the extent of Rs 40,000/- for service tax payment and the rest was carried forward to the next year.Next year the remaining 50% (i.e, Rs 5,00,000/-) was availed. So on the second year you have credit balance of Rs 9,60,000/-.
1. You can utilise the entire amount for making service tax payment of Rs 10,00,000/-.
2. In case these machines are removed as such , then machines should be removed after paying an amount equal to the credit availed in respect of such capital goods under cover of invoice.
3. If the capital goods on which credit has been taken are being removed after being used, then an amount equal to the credit taken on the said capital goods reduced by 2.5% for each quarter of a year or part thereof from the date of taking the cenvat credit shall be paid by you.

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