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Admissibility of MODVAT/ CENVAT Credit on the Input/ Capital Goods, Which
are Written Off being Obsolete or Unfit for Use
Central
Excise Circular No. 645 dated 16th July 2002
I
am directed to refer to Board�s Circular No. 101/ 12/ 95 - CX.8 dated
22.02.95, which stipulates reversal of modvat (cenvat) credit taken on the
inputs, which are subsequently written off being obsolete or unfit for use.
2.
The Audit Report for 1998-99 has pointed out a case involving Hyderabad
III Commissionerate where credit taken on inputs was not reversed although the
inputs were written off by the assessee as being obsolete. The Department
admitted the objection in accordance with policy decision conveyed vide circular
101/12/95-CX dated 22.2.95.
3.
The Board observes that the subject matter of reversal of Modvat (Cenvat)
credit in the event the Inputs/ Capital Goods are written off/ partially written
off in the books of accounts is being raised often. Accordingly, the Board has
examined the issue of admissibility of credit taken on written off inputs/
capital goods including partial write off and has decided as follows:
(i)
In cases, where unused inputs are fully written off, Board�s
instructions dated 22.2.95 shall apply i.e. the credit availed must be paid
back.
(ii)
In cases where the value of the inputs is partially written off / reduced
in the accounts of the company, but the inputs are still capable of and
available for use in the manufacture of finished goods, there would be no
question of payment of CENVAT credit availed.
(iii)
In respect of capital goods viz. components, spare parts etc. which are
written off before use and hence are not proposed to be used, the CENVAT credit
availed will have to be paid back on the same lines as applicable to
"inputs" as mentioned in (i) above.
4.
Trade and field formation may please be informed suitably.
5.
Receipt of the same may be acknowledged.
6.
Hindi version will follow.
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