CENVAT credit
(1) A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of
(i) the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act;
(ii) the duty of excise specified in the Second Schedule to the Excise Tariff Act, leviable under the Excise Act;
(iii) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978);
(iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957);
(v) the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001);
(vi) the Education Cess on excisable goods leviable under section 91 read with section 93 of the Finance (No. 2) Act, 2004 (23 of 2004);
[(via)the Secondary and Higher Education Cess on excisable goods leviable under clause (126) read with clause (128) of the Finance Act, 2007, which by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931 (16 of 1931), has the force of law;]
(vii) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv), (v) [,(vi) and (via);]
[(viia)the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act; [x x x]
PROVIDED that a provider of taxable service shall not be eligible to take credit of such additional duty;]
(viii)the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of 2003);
(ix) the service tax leviable under section 66 of the Finance Act; and
(x) the Education Cess on taxable services leviable under section 91 read with section 95 of the Finance (No. 2) Act, 2004 (23 of 2004), paid on
(i) any input or capital goods received in the factory of manufacture of final product or premises of the provider of output service on or after the 10th day of September, 2004; and
(ii) any input service received by the manufacturer of final product or by the provider of output services on or after 10th day of September, 2004,
including the said duties, or tax, cess paid on any inputs or input service, as the case may be, used in the manufacture of intermediate products, by a job-worker availing the benefit of exemption specified in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 214/86-Cental Excise, dated the 25th March, 1986, published in the Gazette of India vide number G.S.R. 547(E), dated the 25th March, 1986, and received by the manufacturer for use in, or in relation to, the manufacture of final product, on or after the 10th day of September, 2004.
Explanation : For the removal of doubts, it is clarified that the manufacturer of the final products and the provider of output service shall be allowed CENVAT credit of additional duty leviable under section 3 of the Customs Tariff Act on goods falling under heading 9801 of the First Schedule to the Customs Tariff Act.
[(xi) the additional duty of excise leviable under [section 85 of Finance Act, 2005 (18 of 2005).]
(2) Notwithstanding anything contained in sub-rule (1), the manufacturer or producer of final products shall be allowed to take CENVAT credit of the duty paid on inputs lying in stock or in process or inputs contained in the final products lying in stock on the date on which any goods manufactured by the said manufacturer or producer cease to be exempted goods or any goods become excisable.
(3) Notwithstanding anything contained in sub-rule (1), in relation to a service which ceases to be an exempted service, the provider of the output service shall be allowed to take CENVAT credit of the duty paid on the inputs received on and after the 10th day of September, 2004 and lying in stock on the date on which the said service ceases to be an exempted service.
(4) The CENVAT credit may be utilized for payment of
(a) any duty of excise on any final product; or
(b) an amount equal to CENVAT credit taken on inputs if such inputs are removed as such or after being partially processed; or
(c) an amount equal to the CENVAT credit taken on capital goods if such capital goods are removed as such; or
(d) an amount under sub-rule (2) of rule 16 of Central Excise Rules, 2002; or
(e) service tax on any output service :
PROVIDED that while paying duty of excise or service tax, as the case may be, the CENVAT credit shall be utilized only to the extent such credit is available on the last day of the month or quarter, as the case may be, for payment of duty or tax relating to that month or the quarter, as the case may be:
PROVIDED FURTHER that the CENVAT credit of the duty, or service tax, paid on the inputs, or input services, used in the manufacture of final products cleared after availing of the exemption under the following notifications of Government of India in the Ministry of Finance (Department of Revenue),
(i) 32/99-Central Excise, dated the 8th July, 1999 (G.S.R. 508(E), dated 8th July, 1999];
(ii) 33/99-Central Excise, dated the 8th July, 1999 (G.S.R. 509(E), dated 8th July, 1999];
(iii) 39/2001-Central Excise, dated the 31st July, 2001 [G.S.R. 565(E), dated the 31st July, 2001];
(iv) 56/2002-Central Excise, dated the 14th November, 2002 [G.S.R. 764(E), dated the 14th November, 2002];
(v) 57/2002-Central Excise, dated 14th November, 2002 [G.S.R. 765(E), dated the 14th November, 2002];
(vi) 56/2003-Central Excise, dated the 25th June, 2003 [G.S.R. 513(E), dated the 25th June, 2003]; and
(vii) 71/2003-Central Excise, dated the 9th September, 2003 [G.S.R. 717(E), dated the 9th September, 2003,]
shall, respectively be utilized only for payment of duty on final products, in respect of which exemption under the said respective notifications is availed of:
[PROVIDED also that no credit of the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, [x x x] shall be utilised for payment of service tax on any output service:
PROVIDED also that the CENVAT credit of any duty mentioned in sub-rule (1), other than credit of additional duty of excise leviable under [section 85 of Finance Act, 2005 (18 of 2005)], shall not be utilised for payment of said additional duty of excise on final products.]
(5) When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, or premises of the provider of output service, the manufacturer of the final products or provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in rule 9:
PROVIDED that such payment shall not be required to be made where any inputs are removed outside the premises of the provider of output service for providing the output service:
PROVIDED FURTHER that such payment shall not be required to be made when any capital goods are removed outside the premises of the provider of output service for providing the output service and the capital goods are brought back to the premises within 180 days, or such extended period not exceeding 180 days as may be permitted by the jurisdictional Deputy Commissioner of Central Excise, as Assistant Commissioner of Central Excise, as the case may be, of their removal.
[(5A) If the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value.]
(6) The amount paid under [sub-rule (5) and sub-rule (5A)] shall be eligible as CENVAT credit as if it was a duty paid by the person who removed such goods under **[sub-rule (5) and sub-rule (5A)].
(7) Notwithstanding anything contained in sub-rule (1) and sub-rule (4),
(a) CENVAT credit in respect of inputs or capital goods produced or manufactured, by a hundred per cent. export-oriented undertaking or by a unit in an Electronic Hardware Technology Park or in a Software Technology Park other than a unit which pays excise duty levied under section 3 of the Excise Act read with serial numbers 3, 5, 6 and 7 of Noti. No. 23/2003-Central Excise, dated the 31st March, 2003, [G.S.R. 266(E), dated the 31st March, 2003] and used in the manufacture of the final products or in providing an output service, in any other place in India, in case the unit pays excise duty under section 3 of the Excise Act read with serial number 2 of the Noti. No. 23/2003-Central Excise, dated the 31st March, 2003, [G.S.R. 266(E), dated the 31st March, 2003], shall be admissible equivalent to the amount calculated in the following manner, namely:
Fifty per cent. of [X multiplied by {(1+BCD/100) multiplied by (CVD/100)}], where BCD and CVD denote ad valorem rates, in per cent. of basic customs duty and additional duty of customs leviable on the imputs or the capital goods respectively and X denotes the assessable value:
[PROVIDED that the CENVAT Credit in respect of inputs and capital goods cleared on or after 1st March, 2006 from an export oriented undertaking or by a unit in Electronic Hardware Technology Park or in a Software Technology Park, as the case may be, on which such unit pays excise duty under section 3 of the Excise Act read with Serial No. 2 of the Notification No. 23/2003-CE, dt. 31-3-2003 [GSR 266(E), dt. 31-3-2003] shall be equal to multiplied by {(1 + BCD/400) multiplied by (CVD/100)}.]
[(b) CENVAT credit in respect of
(i) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978);
(ii) the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001);
(iii) the education cess on excisable goods leviable under section 91 read with section 93 of the Finance (No. 2) Act, 2004;
[(iiia) the Secondary and Higher Education Cess on excisable goods leviable under clause (126) read with clause (128) of the Finance Act, 2007, which by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931 (16 of 1931), has the force of law;]
(iv) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under items (i), (ii) and (iii) above;
(v) the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of 2003);
(vi) the education cess on taxable services leviable under section 91 read with section 95 of the Finance (No. 2) Act, 2004; and
(vii) the additional duty of excise leviable under [section 85 of Finance Act, 2005],
shall be utilized only towards payment of duty of excise or as the case may be, of service tax leviable under the said Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 or the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001), or the education cess on excisable goods leviable under section 91 read with section 93 of the Finance (No. 2) Act, 2004, additional duty of excise leviable under section 157 of the Finance Act, 2003, or the education cess on taxable services leviable under section 91 read with section 95 of the said Finance (No. 2) Act, 2004 [or the Secondary and Higher Education Cess on excisable goods leviable under clause (126) read with clause (128) of the Finance Act, 2007, which by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931 (16 of 1931), has the force of law], or the additional duty of excise leviable under [section 85 of Finance Act, 2005], respectively, on any final products manufactured by the manufacturer or for payment of such duty on inputs themselves, if such inputs are removed as such or after being partially proceeded or on any output service:
[PROVIDED that the credit of the education cess on excisable goods and secondary and higher education cess on excisable goods and education cess on taxable services can be utilised, either for payment of the education cess on excisable goods or secondary and higher education cess on excisable goods or for the payment of the education cess on taxable services.]
Explanation : For the removal of doubts, it is hereby declared that the credit of the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) paid on or after the 1st day of April, 2000, may be utilised towards payment of duty of excise leviable under the First Schedule or the Second Schedule to the Excise Tariff Act.]
(c) The cenvat credit, in respect of additional duty leviable under section 3 of the customs Tariff Act, paid on marble slabs or tiles falling under [tariff items 2515 12 20 and 2515 12 90 respectively] of the First Schedule to the Excise Tariff Act shall be allowed to the extent of thirty rupees per square meter.
Explanation : Where the provisions of any other rule or notification provide for grant of whole or part exemption on condition of non-availability of credit of duty paid on any input or capital goods, or of service tax paid on input service, the provisions of such other rule or notification shall prevail over the provisions of these rules.
4. Conditions for allowing CENVAT credit
(1) The CENVAT credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of output service:
[PROVIDED that in respect of final products, namely, articles of jewellery falling under heading 7113 of the First Schedule to the Excise Tariff Act, the CENVAT credit of duty paid on inputs may be taken immediately on receipt of such inputs in the registered permises of the person who get such final products manufactured on his behalf, on job work basis, subject to the condition that the inputs are used in the manufacture of such final product by the job worker.]
(2)(a) The CENVAT credit in respect of capital goods received in a factory or in the premises of the provider of output service at any point of time in a given financial year shall be taken only for an amount not exceeding fifty per cent. of the duty paid on such capital goods in the same financial year:
PROVIDED that the CENVAT credit in respect of capital goods shall be allowed for the whole amount of the duty paid on such capital goods in the same financial year if such capital goods are cleared as such in such financial year:
PROVIDED FURTHER that the CENVAT credit of the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, [x x x], in respect of capital goods shall be allowed immediately on receipt of the capital goods in the factory of a manufacturer.
(b) The balance of CENVAT credit may be taken in any financial year subsequent to the financial year in which the capital goods were received in the factory of the manufacturer, or in the premises of the provider of output service, if the capital goods, other than components, spares and accessories, refractories and refractory materials, moulds and dies and goods falling under [heading 6805, grinding wheels and the like, and parts thereof falling under heading 6804] of the First Schedule to the Excise Tariff Act, are in the possession of the manufacturer of final products, or provider of output service in such subsequent years.
Illustration : A manufacturer received machinery on April 16, 2002 in his factory. CENVAT of two lakh rupees is paid on his machinery. The manufacturer can take credit upto a maximum of one lakh rupees in the financial year 2002-2003, and the balance in subsequent years.
(3) The CENVAT credit in respect of the capital goods shall be allowed to a manufacturer, provider of output service even if the capital goods are acquired by him on lease, hire purchase or loan agreement, from a financing company.
(4) The CENVAT credit in respect of capital goods shall not be allowed in respect of that part of the value of capital goods which represents the amount of duty on such capital goods, which the manufacturer or provider of output service claims as depreciation under section 32 of the Income-tax Act, 1961.
(5)(a) The CENVAT credit shall be allowed even if any inputs or capital goods as such or after being partially processed are sent to a job worker for further processing, testing, repair, re-conditioning [, or for the manufacture of intermediate goods necessary for the manufacture of final products] or any other purpose, and it is established from the records, challans or memos or any other document produced by the manufacturer or provider of output service taking the CENVAT credit that the goods are received back in the factory within one hundred and eighty days of their being sent to a job worker and if the inputs or the capital goods are not received back within one hundred eighty days, the manufacturer or provider of output service shall pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods by debiting the CENVAT credit or otherwise, but the manufacturer or provider of output service can take the CENVAT credit again when the inputs or capital goods are received back in his factory or in the premises of the provider of output service.
(b) The CENVAT credit shall also be allowed in respect of jigs, fixtures, moulds and dies sent by a manufacturer of final products to a job worker for the production of goods on his behalf and according to his specifications.
(6) The [Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be] having jurisdiction over the factory of the manufacturer of the final products who has sent the inputs or partially processed inputs outside his factory to a job-worker may, by an order, which shall be valid for a financial year, in respect of removal of such input or partially processed input, and subject to such conditions as he may impose in the interest of revenue including the manner in which duty, if leviable, is to be paid, allow final products to be cleared from the premises of the job-worker.
(7) The CENVAT credit in respect of input services shall be allowed, on or after the day on which payment is made of the value of input service and the service tax paid or payable as indicated in invoice, bill or, as the case may be, challan referred to in rule 9.
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