Transfer of capital good from one factory to other factory
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
20 March 2012
Company has to transfer one of the machine from one factory unit to other factory.
I would like to know the excise implication on the above transaction..
Thank you.
I would like to know the excise implication on the above transaction..
Thank you.
21 March 2012
Dear Friend.
The removal of Machine from one factory to another can be in different ways.
1. The Machine can be removed as such i.e., without using it in the factory.
2. The Machine is removed after some use.
3. The Machine is removed to Jobworker.
4. The Machine is removed as waste.
In first case Then the entire cenvat credit availed should be reversed.
In third case No reversal should be done if such Machine is brought back within 180 days.
In Fourth Case The removal should be done after paying duty on Transaction Value.
In Second Case For Machines other than Computers, The amount to be reversed is Total Cenvat availed less No of quarters or part thereof used multiplied by 2.5% of the cenvat availed.
Hope the concept is clear for more information refer rule 3(5) and rule 3(5A) of Cenvat Credit Rules 2004.
The removal of Machine from one factory to another can be in different ways.
1. The Machine can be removed as such i.e., without using it in the factory.
2. The Machine is removed after some use.
3. The Machine is removed to Jobworker.
4. The Machine is removed as waste.
In first case Then the entire cenvat credit availed should be reversed.
In third case No reversal should be done if such Machine is brought back within 180 days.
In Fourth Case The removal should be done after paying duty on Transaction Value.
In Second Case For Machines other than Computers, The amount to be reversed is Total Cenvat availed less No of quarters or part thereof used multiplied by 2.5% of the cenvat availed.
Hope the concept is clear for more information refer rule 3(5) and rule 3(5A) of Cenvat Credit Rules 2004.
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Querist : Anonymous
Querist :
Anonymous
(Querist)
30 August 2012
Both factory wil be manufacturing goods..
We are transfering some machines which we were using in old factory and it wil be used in new factory for production.
Wil Rule 3(5)/3(5A) or Rule 10- transfer of cenvat credit be applicable in above case.
Thanks
We are transfering some machines which we were using in old factory and it wil be used in new factory for production.
Wil Rule 3(5)/3(5A) or Rule 10- transfer of cenvat credit be applicable in above case.
Thanks
02 August 2025
In the case of transferring capital goods (like machines) **from one factory to another**, where **both factories are manufacturing units**, the excise and CENVAT credit implications are governed by the **CENVAT Credit Rules, 2004**.
### Key Points:
1. **Transfer of Capital Goods Between Factories of the Same Assessee**
If the capital goods are transferred from one factory to another (both belonging to the same manufacturer/assessee), it is generally treated as a **transfer of capital goods on which CENVAT credit has been availed**.
2. **Applicability of Rule 3(5) and 3(5A) - CENVAT Credit Reversal**
* Rule 3(5): For capital goods (excluding computers), if the goods are transferred before completing a specified usage period (5 years), a proportionate reversal of CENVAT credit is required.
* Rule 3(5A): For capital goods like computers, the usage period is 3 years.
3. **Rule 10 – Transfer of CENVAT Credit**
* Rule 10 allows the transfer of CENVAT credit in cases where capital goods or inputs are transferred from one unit to another within the same factory or business, under specific conditions.
* It permits the credit balance in the Electronic Credit Ledger related to inputs, capital goods, or input services to be transferred from one factory unit to another.
---
### So, for your specific scenario:
* Since **both factories are manufacturing units owned by the same entity**, you can **transfer the machine as capital goods**.
* **If the machine is already used**, you have to **reverse a proportionate amount of the CENVAT credit as per Rule 3(5)** based on how many quarters the machine has been used.
* **Alternatively, if you intend to transfer the unutilized credit to the new factory unit**, Rule 10 can be invoked to **transfer the CENVAT credit electronically from one unit to the other** without reversal, provided compliance with the provisions.
---
### Recommended Approach:
* If the machine has been **used for some time**, calculate the reversal amount under **Rule 3(5)** and reverse accordingly.
* If you want to **transfer the credit balance** instead of reversal, check if you meet the conditions under **Rule 10** and file the required documentation.
* Keep proper records of the transfer, including valuation, transfer date, and compliance with CENVAT credit reversal or transfer rules.
---
**References:**
* Rule 3(5) & 3(5A) of CENVAT Credit Rules, 2004
* Rule 10 of CENVAT Credit Rules, 2004
---
**Do you want me to help draft the calculation or suggest documents required for compliance?**
### Key Points:
1. **Transfer of Capital Goods Between Factories of the Same Assessee**
If the capital goods are transferred from one factory to another (both belonging to the same manufacturer/assessee), it is generally treated as a **transfer of capital goods on which CENVAT credit has been availed**.
2. **Applicability of Rule 3(5) and 3(5A) - CENVAT Credit Reversal**
* Rule 3(5): For capital goods (excluding computers), if the goods are transferred before completing a specified usage period (5 years), a proportionate reversal of CENVAT credit is required.
* Rule 3(5A): For capital goods like computers, the usage period is 3 years.
3. **Rule 10 – Transfer of CENVAT Credit**
* Rule 10 allows the transfer of CENVAT credit in cases where capital goods or inputs are transferred from one unit to another within the same factory or business, under specific conditions.
* It permits the credit balance in the Electronic Credit Ledger related to inputs, capital goods, or input services to be transferred from one factory unit to another.
---
### So, for your specific scenario:
* Since **both factories are manufacturing units owned by the same entity**, you can **transfer the machine as capital goods**.
* **If the machine is already used**, you have to **reverse a proportionate amount of the CENVAT credit as per Rule 3(5)** based on how many quarters the machine has been used.
* **Alternatively, if you intend to transfer the unutilized credit to the new factory unit**, Rule 10 can be invoked to **transfer the CENVAT credit electronically from one unit to the other** without reversal, provided compliance with the provisions.
---
### Recommended Approach:
* If the machine has been **used for some time**, calculate the reversal amount under **Rule 3(5)** and reverse accordingly.
* If you want to **transfer the credit balance** instead of reversal, check if you meet the conditions under **Rule 10** and file the required documentation.
* Keep proper records of the transfer, including valuation, transfer date, and compliance with CENVAT credit reversal or transfer rules.
---
**References:**
* Rule 3(5) & 3(5A) of CENVAT Credit Rules, 2004
* Rule 10 of CENVAT Credit Rules, 2004
---
**Do you want me to help draft the calculation or suggest documents required for compliance?**
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