Rule 6 (2 ) : Cenvat Credit ,if goods and services partly exempted and partly taxable – Excise

Rule 6 (2 ) : Cenvat Credit ,if goods and services partly exempted and partly taxable :

Option-1: As per rule 6(2) of the Cenvat Credit Rules,2004

If separate accounts maintained for the receipt, consumption and inventory of inputs, then the assessee shall take CENVAT credit on inputs which are used :

In or in relation to the manufacture of dutiable final products excluding exempted goods;and
For the provision of output services excluding exempted services.

If separate accounts maintained for the receipt and use of input services , then the assessee shall take CENVAT credit on input services which are used :

In or in relation to the manufacture of dutiable final products excluding exempted goods and their clearance upto the place of removal and
For the provision of output services excluding exempted services

If separate accounts are not maintained –

In this case the manufacturer or service provider has following three options :

Option-1 : The manufacturer of goods shall pay an amount equal to 6% of ‘value’ of exempted goods and the provider of output services shall pay an amount equal to 6% of ‘value’ of the exempted services. (Rule 6(3) (i) of Cenvat credit rules ,2004 )

Option-2 : The manufacturer of goods shall pay an amount proportionately attributable to CENVAT credit utilized for exempted final product and exempted output services as provided in rule 6(3A) of CENVAT CREDIT RULES ,2004. (Rule 6(3) (ii) of Cenvat credit rules ,2004 )

Option-3 : As per Rule 6(3) (iii) of Cenvat credit rules ,2004 ,maintain separate accounts for inputs and pay ‘amount’ as determined under rule 6(3A) in respect of input services.

Rule 6(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 .However , the units availing exemption under any notification ,based upon the value or quantity of clearances made in a financial year ( SSI Exemption ) ,will be entitled to avail Cenvat credit on capital goods. The said credit can be utilized when such units start paying duties of excise.

Rule 6 (6 ) : Goods sold to EOU, SEZ , EHTP, STP, UN Agencies: Dutiable goods removed without payment of duty to EOUs , SEZ , EHTP, STP, UN agencies as per rule 6(6) of Cenvat credit rules 2004, then the Cenvat credit on inputs/capital goods/input services used in the manufacture of such final products shall be allowed. It means CENVAT Credit need not required to be reversed or pay an ‘amount’. It means these goods are not ‘exempted goods’.

Exempted goods cannot be exported under bond & benefit of rule 6(6) of Cenvat Credit rules , 2004 is not available. i.e. Manufacturer is not eligible to take Cenvat credit of inputs/capital goods/input services used in such goods. It means these goods are to be considered as exempted goods only.

As per rule 6(6A) the provisions of rule 6(1) , 6(2) , 6(3) and 6(4) shall not be applicable in case the taxable services are provided, without payment of service tax to a unit in SEZ or to a developer of a SEZ for their authorized operations

For the purpose of Rule-6 ,a service provided or agreed to be provided shall not be an exempted service when –

The service is exported as given in rule6A of the service tax rules,1994 and the payment for the services is to be received in convertible foreign currency and such payment has not been received for a period of 6 months or such extended period ,as may be allowed from time to time by RBI from the date of provision .

However , if such payments is received after specified period or extended period allowed by RBI but within 12 months from such period ,the service provider shall be entitled to take the credit of the amount equivalent to the CENVAT credit paid earlier to the extent it relates to such payment ,on the basis of documentary evidence of the payment so received.

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