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TMI BlogProportionate reversal of creditX X X X Extracts X X X X X X X X Extracts X X X X ..... Proportionate reversal of credit X X X X Extracts X X X X X X X X Extracts X X X X ..... e manufacture of exempted goods in the following case? Say, two products X and Y are simultaneously produced from inputs A and B ( X is the more valuable good). Suppose 1000 Tons each of A & B are used for producing 20 Tons of X, an exempted good and 50 Tons of Y, a dutiable product.How can we calculate the proportionate credit to be reversed by the manufacturer? Whether the manufacturer has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consider the quantity or value of X and Y produced? Is he free to choose either basis (whichever is more advantageous)? Reply By Pradeep Khatri: The Reply: Dear Dalia, Please go as per the formula prescribed in the relevant Rules of CENVAT credit Rules, 2004. Regards Team YAGAY & SUN (Management & Indirect Tax Consultants) Reply By Dalia Felix: The Reply: Sir, Thanks for your quick respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. But frankly, I don't get the answer-whether based on quantity or value of the products? Reply By Pradeep Khatri: The Reply: On Quantity, which has not been used in manufacturing of dutiable finished goods. Reply By Dalia Felix: The Reply: Sir, Did you mean, Credit to be reversed on A=Total credit available on A * (20/70) Correct? Reply By Greeshma VP: The Reply: In case of inputs, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Rule 6 does not prescribe a specific formula for the amount to be reversed, It simply states that the amount equivalent to Cenvat credit attributable to inputs used in manufacture of exempted goods is to be reversed. However, in case of input services, a clear formula is given which is based on "value of exempted and dutiable goods" It may be better to consider turnover of X and Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of reversal. Reversal to be made = Total Cenvat credit availed on inputs * turnover of X / total turnover Reply By Dalia Felix: The Reply: Dear Greeshma, Thanks for the reply. I suggested quantity based reversal because at the end of the financial year, we have to determine the 'actual amount reversible on inputs' based on quantity (Clause (c) of Sub-rule 3 (A), Rule 6). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Please give your comments. Reply By Greeshma VP: The Reply: I was under an impression that assessee is free to chose the method to determine the cenvat required to be reversed, The quantity based working seems to be fair. However, won't that be a more cumbersome procedure in cases where there are numerous inputs on which credit is availed. Reply By Rajagopalan Ranganathan: The Reply: Sir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,
The formula prescribed under rule 6 (3A) (b) and (c) are based on value of the final products manufactured and cleared and/or output service provided and inputs and input services utilized for such manufacture and/or provision of output service. You cannot adopt quantity since it is advantageous to you. X X X X Extracts X X X X X X X X Extracts X X X X
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