INTRODUCTION ON CENVAT CREDIT :

In September 2004, GOI came out with the CENVAT Credit Rules ,2004 by merging the CENVAT Credit Rules ,2002 and Service tax credit Rules ,2002.

The levy of further duty on duty paid raw materials used in the production results in a cascading effect of duty (i.e. duty on duty) .The introduction of CENVAT CREDIT helps the manufacturer to take the credit of the duty paid on raw materials and utilize it for setting off against the excise duty payable on the final product.

Note- CENVAT CREDIT Rules, 2004 is an integration of excise duty and service tax. It means while paying excise duty on finished goods, the manufacturers are eligible to take credit of excise duty on input goods, capital goods and service tax on input services as CENVAT CREDIT. Likewise, Service Provider also eligible to take   service tax on input services, excise duty on input goods and capital goods as CENVAT CREDIT.