(1) Capital goods in respect of which input tax credit is claimed under sub-section (2) of section 11 shall be of the description given in clause (x) of section 2, whether the claim is made by a manufacturer or not.

(1A) Where the goods are of the description given in clause (x) of section 2, the value of which is less than rupees five lakhs, other than those falling under any of the categories notified under clause(x) of section 2, input tax credit shall be claimed in accordance with the provisions of sub-section (3) of section 11.

(1B) Any dealer claiming input tax credit under sub-section (2) of section 11 or refund of input tax under section 13 in respect of capital goods shall apply to the assessing authority in Form 25 within thirty days from the date specified in the said sub-section along with copies of the tax invoice issued by registered dealers.

(2) Where the assessing authority, on receipt of such application, is satisfied that the application is in order and the claim of input tax credit is admissible, it shall inform the dealer in Form 25 B accordingly, within thirty days from the date of receipt of such application.

(3) Where the assessing authority, is not satisfied that the particulars contained in the application are correct and complete or that the claim of input tax credit is other wise in admissible, it shall reject the application, for reasons to be recorded in writing, after affording the dealer an opportunity of being heard.

(4) Deduction of input tax under sub-section (2) of section 11 or refund of input tax under section 13 shall be subject to the following conditions:-

(a) The deduction or as the case may be, refund, shall be allowed in thirty-six equal monthly instalments over a period of three years from the date specified in sub-section (2) of section 11;

(aa). in the case of industrial units including those which have undertaken expansion, diversification or modernization the deduction or refund, as the case may be, shall be allowed in twelve monthly instalments from the date specified in the proviso to sub section (2) of section 11.

(b) No deduction of input tax shall be allowed where the use of capital goods relates wholly to the manufacture of exempted goods and/or goods falling under the fourth Schedule.;

Provided that where the capital goods are used in relation to any goods , other than those included in the fourth schedule, sold in the course of export, refund of input tax shall be allowed, subject to the provisions of rule 47, irrespective of whether the goods so exported is exempted from tax or not.

(c) Where the capital goods are used from the commencement of commercial production, in relation to taxable and exempted or non taxable goods simultaneously, the monthly instalments fixed under clause (a) shall be apportioned between the taxable and exempted or non-taxable goods, on the basis of the ratio of taxable and exempted turnover during the period in which the input tax credit is claimed. The portion of the input tax allocable to taxable goods shall be allowed and that allocable to exempted goods disallowed and deducted from the input tax credit eligibility of the dealer;

(d) where the capital goods used for manufacture of exempted or non-taxable goods, is subsequently used for manufacture of taxable goods wholly or partly, the input tax credit allowable for the capital goods shall be calculated as follows;-

(i) where the capital goods are used subsequently in relation to taxable goods only, the input tax credit for the months in which the capital goods are used in relation to exempted goods shall be disallowed and the input tax credit for the months during which the capital goods are used for manufacture of taxable goods shall be allowed;

(ii) where the capital goods are used subsequently in relation to exempted or non taxable goods and taxable goods simultaneously, the input tax credit for the period during which such capital goods are used for manufacture of exempted or non taxable goods shall be disallowed and the input tax credit for the months during which the capital goods are used for manufacture of taxable goods and exempted or non taxable goods shall be determined in the manner prescribed under clause (c);

(e) Where the capital goods are used partly in relation to goods falling under the first Schedule and/or the fourth Schedule and partly in relation to taxable goods, the input tax credit calculated under clause(a) above shall be apportioned among the goods falling under the first Schedule, fourth Schedule and other goods on the basis of the ratio of the turnover of goods coming under the first schedule and fourth Schedule and that of other goods, and the input tax credit allowed or as the case may be, disallowed in the manner specified in clause (c) above;

(f) The dealer shall claim the deduction in the monthly return.

(g) where refund of input tax is available in respect of capital goods under rule 46 or rule 47 in respect of which input tax credit is also available under section 11, the amount for which refund or input tax credit , as, the case may be is to be allowed, shall be arrived at in the manner specified in clause © with suitable modification.

(5) (a) Where there is a change in use of the capital goods, on or after the claim for input tax credit has been allowed, and the dealer is no longer eligible for such input tax credit, the dealer shall inform the assessing authority within ten days of such change in use.

(b) The assessing authority shall inform the dealer that he is no longer eligible for the input tax credit for the capital goods with effect from the end of the month preceding the month in which such change of use has occurred.

(6) Where the capital goods are transferred to an industrial units manufacturing taxable goods in the state by way of sale of business as a whole, input tax credit to the extent of that remaining un-availed by the transferor shall, subject to the other provisions of this rule, be allowed to the transferee with effect from the date from which the capital goods are put to use by the transferee or the date of sale of goods manufactured using such capital goods, which ever is later.

(7) Where the capital goods are disposed of otherwise than by way of sale within a period of three years as specified in sub-section (2) of section 11, the dealer shall not be eligible for input tax credit in relation to such capital goods subsequent to such disposal.