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Excise duty exemption claimed

Cool NJ (cs) (31 Points)

12 February 2011

My company is into power generation and has given excise exemption certificate to one of its capital goods supplier. Since the exemption certificate is on the finished goods (for which purchase order was given), the supplier is insisting now to charge 5% more since he cannot avail cenvat on raw materials (inputs). Please guide.

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4 Replies

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 12 February 2011

if the exemption is based on any bond, then he can take cenvat credit.

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Cool NJ (cs) (31 Points)
Replied 12 February 2011

Exemptn given to Company is not thru any bond... It is by submitting application to Ministry along with necessary papers. No bond involved.

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 12 February 2011

Notification

No.16/2009 – Central Excise (N.T.)

New Delhi, the 7th July, 2009

G.S.R. (E).- In exercise of the powers conferred by section 37 of the Central Excise

Act, 1944 (1 of 1944) and section 94 of the Finance Act, 1994 (32 of 1994), the Central

Government hereby makes the following rules further to amend the CENVAT Credit Rules,

2004, namely:-

1. (1) These rules may be called the CENVAT Credit (Amendment) Rules, 2009.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the CENVAT Credit Rules, 2004 (hereinafter referred to as the said rules), in rule 2, in

clause (k), in Explanation 2, after the words “factory of the manufacturer”, the following shall be

inserted, namely:-

“but shall not include cement, angles, channels, Centrally Twisted Deform bar(CTD) or

Thermo Mechanically Treated bar(TMT) and other items used for construction of factory

shed, building or laying of foundation or making of structures for support of capital

goods”.

3. In the said rules, in rule 3, for sub-rule (5B), the following sub-rule shall be substituted,

namely:-

“(5B) If the value of any,

(i) input, or

(ii) capital goods before being put to use,

on which CENVAT credit has been taken is written off fully or where any provision to

write off fully has been made in the books of account, then the manufacturer or service

provider, as the case may be, shall pay an amount equivalent to the CENVAT credit taken

in respect of the said input or capital goods:

Provided that if the said input or capital goods is subsequently used in the manufacture of

final products or the provision of taxable services, the manufacturer or output service

provider, as the case may be, shall be entitled to take the credit of the amount equivalent

to the CENVAT credit paid earlier subject to the other provisions of these rules.”.

4. In the said rules, in rule 6, in sub-rule (3), for clause (i), the following clause shall be

substituted, namely:-

“(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 per

cent. of value of the exempted services; or”.

[F.No.334/13/2009-TRU]

(Prashant Kumar)

Under Secretary to the Government of India

Note.- The principal rules were notified vide notification No. 23/2004-Central Excise (N.T.),

dated the 10th September 2004, vide number G.S.R.600(E), dated the 10th September,2004, and

last amended by notification No. 50/2008-Central Excise (N.T.), dated the 31st December, 2008,

vide number G.S.R. 908(E), dated the 31st December, 2008.

Soumyen Sarkar (free) (102 Points)
Replied 05 March 2011

The Rule 6 of Cenvat Credit Rules 2004, provides the guiding rule on availment of Cenvat Credit on goods used both for dutiable and exempted goods. Your client cannot take cenvat credit on goods procured for manufacture of exempted good.