Query idt- ccr - rule 3(5) - urgent

Originally posted by : Kunal
	As per proviso to rule 3(5) of CCR, CENVAT taken on capital goods (Comp. & Comp peripherals) is reversed using Percentage points SLM Method as 10%, 8%, 5%, 1% for each quarter in Year 1, 2, 3, 4. My Query is How to calculate the amount to be reversed? As per Prac. Manual Q 14 of CCR , Amount to be reversed is Amount of Excise duty (TOTAL) X %age. whereas as told by one of the teacher it should be : 50% booked in First year x %age of respective years plus  remaining booked in 2nd Year x %age of respective years    for example : Excise duty of 100000. , asset disposed off in the last month of third year as per Prac manual : 100000 - 100000 x (10% x 4 + 8% x 4 + 5% x 4) = 8000/- as per the teacher : 50000 - 50000 x (10% x 4 + 8% x 4 + 5% x 4) = 4000/-                                     50000 - 50000 x  (10% x 4 + 8% x 4 ) = 14000/- ie total 18000/-   now which one is correct???????????????

The practise manual's method is actually right, when reversing the CENVAT credit under Rule 3(5), there is no relation with the amount of credit that you have availed, what should be reversed is the total amount of excise on the capital good. So in essence it's on 100% of the total excise paid on the capital good. 

Am taking an example of a non computer capital good just for easy calculation, say you buy a capital good for 1000 , assume excise on it to be around 80. Since it's a capital good and you put to use (very important, if you're removing it as such then you'll have the total amount of excise duty available), you get 50% of the 80 as cenvat credit in the first year for utliization - 40.

Suppose you clear the capital good after two quarters - 5% value reduction. So the duty reversed is 80-5% of 80 - 76.

So now you can pay the duty of 76 by  

Using the 40 available CENVAT credit

Rest 36 - PLA or Cash.