Reversal of input credit proportionately on Exempted Sales

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

30 August 2010 Dear Experts,

One of my clients are required by the Excise department to reverse inputs availed on purchases to the extent of Exempted Sales. Can u tell me the law governing and procedure thereon

gautam kumar vaish

gautam kumar vaish (Expert)
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30 August 2010 as per rule 6 of the cenvat credit rules 2004 the department is correct in asking you the reversal of inputs.
the actual procedure is,
1. maintain sepaerate register for receipt, consumtion and inventory of input & input service, and take the cenvat credit only on the manufature of the dutiable part.
2. if separate register are not maintained, then either pay an amount of 10% or 8% in case of maanufacture of service provider, of the amount of value of exempted goods, and take the whole credit, or pay an amount equivalent to the amount of cenvat credit attributable to input & input services subject to prior intimation to the suprintendent of central excise in writing.