Provision for slow moving stock & expunging of cenvat credit

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This query is : Resolved

Ravichandran (Querist)

08 August 2011 Dear Experts,

We make provision for slow moving stocks in books of account every month as per our group accounting policy. Provision for slow movers is determined based on the turnover of the components and finished goods. Stock for which we make provision are good stocks (not obselete) and can be sold in the market very well. To comply with the group accounting standards we are making provision for slow moving stocks on the monthly basis.

Now the question is applicablility of Rule 3(5B) of Cenvat Credit Rules 2004.

1) Do we need to expunge the full amount of input cenvat credit taken on the inputs for which provision has been made? Is there any such requirement under Cenvat Credit Rules.

2) If there is any requirement for reversal of Cenvat Credit on such stocks where provision have been made then how to determine the duty amount for Finished Goods.

Regards

Ravi

U S Sharma

U S Sharma (Expert)

08 August 2011 1)no need to make provision for duty payment, but at the time of clearence, duty should be reversed as per rule 3(5B) of CCR 2004.

2) duty on finish goods should be paid as per invoice value.

Ravichandran

Ravichandran (Querist)

09 August 2011 Dear Sharma,

Thanx for the reply. Still am not clear.

U S Sharma

U S Sharma (Expert)

09 August 2011 in both cases the duty is to be reversed in case 1 and paid in case 2 at the time of clearance only.

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