samit (projects) (24 Points)
22 September 2010If a company covered under excise rule gets excise duty exemption on certain product -"A"; how the CENVAT will be claimed on raw meterial purchesed to manufacture Product-"A". ?
is having excise duty exemption on product not benificial?
Please reply
Samit
C.V.R.SARMA
(SERVICE)
(90 Points)
Replied 24 September 2010
No cenvat credit can be allowed once the final product is exempted. In fact, once the duty is exempted, what is the necissity of taking the cenvat credit on the inputs. However, if the product is exported, then you can claim refund of cenvat credit availed on the inputs under rule 5 of Cenvat credit rules,2004.
R Chakkarabani
(Senior Associate)
(51 Points)
Replied 19 August 2011
| Originally posted by : C.V.R.SARMA | ||
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No cenvat credit can be allowed once the final product is exempted. In fact, once the duty is exempted, what is the necissity of taking the cenvat credit on the inputs. However, if the product is exported, then you can claim refund of cenvat credit availed on the inputs under rule 5 of Cenvat credit rules,2004. |
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Thanks sir, could you please clarify this.
say example i am working with wind turbine company, my final product is duty exempted. but we are purchasing some items with duty and also for service related we are taking some service tax credit.
could you pls clarify the adjustement procedure pls.
CA Saiyum khan
(Practicing CA)
(690 Points)
Replied 21 August 2011
According to rule 6 the cenvat credit taken on producing the exmpted goods has to be reversed. For detail the rule has been pasted below.
Rule 6. Obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services.- (1) The CENVAT credit shall not be allowed on such quantity of input or input service which is used in the manufacture of exempted goods or for provision of exempted services, except in the circumstances mentioned in sub-rule (2).
Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule.
(2) Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services, and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for receipt, consumption and inventory of input and input service meant for use in the manufacture of dutiable final products or in providing output service and the quantity of input meant for use in the manufacture of exempted goods or services and take CENVAT credit only on that quantity of input or input service which is intended for use in the manufacture of dutiable goods or in providing output service on which service tax is payable.
(3) Notwithstanding anything contained in sub-rules (1) and (2), the manufacturer of goods or the provider of output service, opting not to maintain separate accounts, shall follow either of the following options, as applicable to him, namely:-
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(i) |
the manufacturer of goods shall pay an amount equal to five per cent. of value of the exempted goods and the provider of output service shall pay an amount equal to six percent. of value of the exempted services; or |
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(ii) |
the manufacturer of goods or the provider of output service shall pay an amount equivalent to the CENVAT credit attributable to inputs and input services used in, or in relation to, the manufacture of exempted goods or for provision of exempted services subject to the conditions and procedure specifiedin sub-rule (3A). |
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Explanation I.- If the manufacturer of goods or the provider of output service, avails any of the option under this sub-rule, he shall exercise such option for all exempted goods manufactured by him or, as the case may be, all exempted services provided by him, and such option shall not be withdrawn during the remaining part of the financial year. |
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Explanation II.-For removal of doubt, it is hereby clarified that the credit shall not be allowed on inputs and input services used exclusively for the manufacture of exempted goods or provision of exempted service. |
(3A) For determination and payment of amount payable under clause (ii) of sub-rule (3), the manufacturer of goods or the provider of output service shall follow the following procedure and conditions, namely:-
(a)
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(a) |
while exercising this option, the manufacturer of goods or the provider of output service shall intimate in |
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(i) |
name, address and registration No. of the manufacturer of goods or provider of output service; |
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(ii) |
date from which the option under this clause is exercised or proposed to be exercised; |
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(iii) |
descripttion of dutiable goods or taxable services; |
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(iv) |
descripttion of exempted goods or exempted services; |
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(v) |
CENVAT credit of inputs and input services lying in balance as on the date of exercising the option |
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(b) |
the manufacturer of goods or the provider of output service shall, determine and pay, provisionally, for |
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(i) |
the amount equivalent to CENVAT credit attributable to inputs used in or in relation to manufacture of |
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(ii) |
the amount of CENVAT credit attributable to inputs used for provision of exempted services |
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(iii) |
the amount attributable to input services used in or in relation to manufacture of exempted goods or |
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(c) |
the manufacturer of goods or the provider of output service, shall determine finally the amount of CENVAT |
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(i) |
the amount of CENVAT credit attributable to inputs used in or in relation to manufacture of exempted |
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(ii) |
the amount of CENVAT credit attributable to inputs used for provision of exempted services = (J/K) |
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(iii) |
the amount attributable to input services used in or in relation to manufacture of exempted goods or |
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(d) |
the manufacturer of goods or the provider of output service, shall pay an amount equal to the difference between the aggregate amount determined as per condition (c) and the aggregate amount determined and paid as per condition (b), on or before the 30th June of the succeeding financial year, where the amount determined as per condition (c) is more than the amount paid; |
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(e) |
the manufacturer of goods or the provider of output service, shall, in addition to the amount short-paid, be |
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(f) |
where the amount determined as per condition (c) is less than the amount determined and paid as per condition (b), the said manufacturer of goods or the provider of output service may adjust the excess amount on his own, by taking credit of such amount; |
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(g) |
the manufacturer of goods or the provider of output service shall intimate to the jurisdictional |
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(i) |
details of CENVAT credit attributable to exempted goods and exempted services, month wise, for the |
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(ii) |
CENVAT credit attributable to exempted goods and exempted services for the whole financial year, |
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(iii) |
amount short paid determined as per condition (d), along with the date of payment of the amount short-paid, |
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(iv) |
interest payable and paid, if any, on the amount short-paid, determined as per condition (e), and |
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(v) |
credit taken on account of excess payment, if any, determined as per condition (f); |
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(h) |
where the amount equivalent to CENVAT credit attributable to exempted goods or exempted services cannot be determined provisionally, as prescribed in condition (b), due to reasons that no dutiable goods were manufactured and no taxable service was provided in the preceding financial year, then the manufacturer of goods or the provider of output service is not required to determine and pay such amount provisionally for each month, but shall determine the CENVAT credit attributable to exempted goods or exempted services for the whole year as prescribed in condition (c) and pay the amount so calculated on or before 30th June of the succeeding financial year. |
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where the amount determined under condition (h) is not paid within the said due date, i.e., the 30th June, the manufacturer of goods or the provider of output service shall, in addition to the said amount, be liable to pay interest at the rate of twenty four per cent. per annum from the due date till the date of payment. |
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(4) No CENVAT credit shall be allowed on capital goods which are used exclusively in the manufacture of exempted goods or in providing exempted services, other than the final products which are exempt from the whole of the duty of excise leviable thereon under any notification where exemption is granted based upon the value or quantity of clearances made in a financial year.
(5) Notwithstanding anything contained in sub-rules (1), (2) and (3), credit of the whole of service tax paid on taxable service as specified in sub-clause (g), (p), (q), (r), (v), (w), (za), (zm), (zp), (zy), (zzd), (zzg), (zzh), (zzi), (zzk), (zzq) and (zzr) of clause (105) of section 65 of the Finance Act shall be allowed unless such service is used exclusively in or in relation to the manufacture of exempted goods or providing exempted services.
(6) The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case the excisable goods removed without payment of duty are either-
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(i) |
cleared to a unit in a special economic zone; or to a developer of a special economic zone for their authorized operations ; or |
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(ii) |
cleared to a hundred per cent. export-oriented undertaking; or |
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cleared to a unit in an Electronic Hardware Technology Park or Software Technology Park; or |
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(iv) |
supplied to the United Nations or an international organization for their official use or supplied to projects funded by them, on which exemption of duty is available under notification of the Government of India in the Ministry of Finance (Department of Revenue) No.108/95-Central Excise, dated the 28th August, 1995, number G. S R. 602 (E), dated the 28th August, 1995; or |
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(v) |
cleared for export under bond in terms of the provisions of the Central Excise Rules, 2002; or |
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(vi) |
gold or silver falling within Chapter 71 of the said First Schedule, arising in the course of manufacture of copper or zinc by smelting; or. |
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(vii) |
all goods which are exempt from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable under sub-section (1) of section 3 of the said Customs Tariff Act when imported into India and are supplied,— |
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(a) against International Competitive Bidding; or |
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(b) to a power project from which power supply has been tied up through tariff based competitive bidding; or |
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(c) to a power project awarded to a developer through tariff based competitive bidding, |
in terms of notification No. 6/2006-Central Excise, dated the 1st March, 2006.
CA Unnikrishnan Nair N
(Chartered Accountant)
(2083 Points)
Replied 22 August 2011
Inputs and input service used in relation of manufactur of exempted goods are not eligible for cenvat credit.
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