Full CENVAT Reversal Now even if Partial Write-off of Inputs / Cap Goods Made

---------- Forwarded message ----------
From: Rebecca Andrews <rebecca.andrews88@yahoo.in>
Date: Mon, Mar 7, 2011 at 5:00 AM
Subject: Message from EGroup of SolapurCAs Full CENVAT Reversal Now even if Partial Write-off of Inputs / Cap Goods Made
To:

 

Changes in CCR 2004 will impact majority of the manufacturers now.  It is a common practice and also requirement from Stat Auditors in manufacturing industry to make partial provision on slow-moving input materials due to its oldage and decrease in value. Corporates were not required to reverse the Credit on such inputs on which partial provision was made. Reversal was applicable only when FULL (100%) provision was made.  Now with the amendment to Rule 3(5B), w.e.f. 01-03-2011 all manufacturers who have made provision on inputs even Re. 1/- are also required reverse the whole of CENVAT Credit availed. With this change, we can expect preventive team to visit all manufactures to check provision on inputs and requiring reversal immediately with interest for delay!.  Sub-Rule 5B of Rule 3 of the CENVAT Credit Rules 2004 - Before 01-03-2011 read as follows:  QUOTE  "If the value of any (i) input or (ii) capital goods before being put to use, on which CENVAT credit has been taken is written off fully or where any provision to write off fully has been made in the books of account, then the manufacturer shall pay an amount equivalent to the CENVAT credit taken in respect of the said input or capital goods."  UNQUOTE  Amended Rule 3(5B) reads as follows:  QUOTE  "If the value of any (i) input or (ii) capital goods before being put to use, on which CENVAT credit has been taken is written off fully or partially or where any provision to write off fully or partially has been made in the books of account, then the manufacturer shall pay an amount equivalent to the CENVAT credit taken in respect of the said input or capital goods.  UNQUOTE     Please give your valuable feed-back. Kind regards, Rebecca Andrews

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