Some of important Rules under CENVAT CREDIT RULES, 2004 ARE:
Rule -3(4 ) : As per this rule credit may be utilized for payment of –
(a ) any duty of excise on any final products 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 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 (it means if the process to which the goods are subjected before being removed does not amount to manufacture, the manufacturer shall pay an amount equal to the CENVAT credit taken)
(e) service tax on any output service.
Rule -3(2 ) : As per this rule manufacturers is allowed to take CENVAT Credit lying in stock or work in progress or inputs contained in the final products lying as stock on the date on which any goods manufactured by the said manufacturer ceases to be exempted goods (i.e. goods become dutiable ) .The same provision is also applicable for service providers rule 3(3 )
Rule 3 (5 ) relating to removal of inputs or capital goods as such :
When inputs or capital goods on which CENVAT Credit has already been taken, are removed as such from the factory, or premises of the manufacturer of final products OR from premises of the provider of output service 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 as referred in rule 9 of the Cenvat Credit Rules,2004.
Exceptions : (a )Cenvat Credit not required to be reversed if input goods or capital goods removed outside the premises of the provider of output service for providing the output service (b ) Cenvat Credit shall not be required to be reversed where any inputs are removed outside the factory for providing free warranty for final products.
Rule 3 (5A ) Removal of capital goods after use-
If the capital goods ,on which CENVAT Credit has been taken ,are removed after being used ,whether as capital goods or as scrap/waste , the manufacturer or provider of output service shall pay-
(a ) An amount equal to CENVAT Credit taken on the said capital goods as reduced by the percentage points calculated by SLM for each quarter of a year or part thereof from the date of taking the CENVAT Credit OR
(b ) Equal to excise duty payable on transaction value )i.e. sale value )
Whichever is higher.
Note- The following percentages points calculated by SLM for each quarter of a year or part thereof from the ‘date of taking CENVAT Credit ‘-
- For computers and computer peripherals :
- For each quarter in the first year :@ 10 %
- For each quarter in the 2nd year :@ 8 %
- For each quarter in the 3 rd year :@ 5 % and
- For each quarter in the 4th & 5th year :@ 1 %
- For other capital goods : @2.5% for each quarter
Rule 3(6 ): The buyer can avail Cenvat Credit of the amount paid on removal of the capital goods.
Rule 3(5C ): Remission of duty on final products and consequent CENVAT Reversal on inputs :
Under Rule 21 of Central Excise Rules ,2002 , relating to Remission of duty, if the payment of duty on any goods manufactured by the assessee is ordered to be remitted ,then , the CENVAT Credit taken on the inputs used in manufacture of the said goods including CENVAT Credit of input services used in relation to the productionof said goods ,shall be reversed.
Note- No Reversal is required for capital goods used in manufacture or production.
Rule-4 : Conditions for allowing CENVAT CREDIT :
( a ) CENVAT CREDIT on input services allowed 100% in the 1st year itself.
( b) CENVAT CREDIT on input goods allowed 100% in the 1st year itself
(c ) CENVAT CREDIT on Capital goods allowed upto 50% in the 1st year of receipt and balance in subsequent year or years
- CENVAT CREDIT Capital goods are not allowed if depreciation under sec. 32 of the Income Tax Act, 1961 has been claimed on the portion of excise duty.
- CENVAT CREDIT of the additional duty leviable under section 3(5) of the Customs Tariff Act, in respect of capital goods shall be allowed immediately on receipt of the capital goods in the factory of a manufacturer.
- CENVAT CREDIT on input goods, input services and capital goods well allowed based on any document. The High Court held that Cenvat Credit could be taken on the strength of private challans (i.e. other than prescribed documents ) as the same were not found fake and there was proper certification that duty has been paid (CCEx. V StelkoStrips Ltd. 2010(255) ELT 397(P&h).
Rule 4 (1 ): CENVAT Credit on inputs :
CENVAT Credit is to be allowed immediately on receipt of inputs by the manufacturer or provider of output service or in the premises of the job worker ,in case goods are sent directly to the job worker on the direction of the manufacturer or the provider of output services ,as the case may be . However , credit to service provider is available subject to maintenance of documentary evidence of delivery of inputs and location of inputs./However , the manufacturer or the provider of output service shall not take CENVAT Credit after one year of the date of issue of any of the documents like invoice ,bill etc. as specified in rule 9(1).
Rule 4 (7 ) :
(a ) CENVAT Credit on input service can be taken on receipt of invoice ;However CENVAT Credit shall be reversed in case the payment is not made within 3 months from invoice /bill/challan ; re-credit is available on the subsequent payment except where service tax is paid under full reverse charge.
(b ) In case of full reverse charge CENVAT Credit is available only on payment of service tax by the service receiver.
(c ) In case of partial reverse charge ,CENVAT Credit shall be allowed as under-
- For service receiver’s portion : only after payment of service tax to the Government Account by the receiver of service.
- For service provider’s portion: CENVAT Credit shall be allowed ,on or after the day on which the invoice/bill/challan referred in rule 9 is received.
(d ) CENVAT CREDIT availed shall be reversed when payment towards any input service is refunded or credit note is given to manufacturer or service provider.
(f ) The manufacturer or the provider of output service shall not take CENVAT Credit after one year of the date of issue of any of the documents like invoice ,bill etc. as specified in rule 9(1).
Rule 4 (2 ) : CENVAT Credit on capital goods :
(a ) Not exceeding 50% in the year of acquisition /purchase of capital goods and balance credit to be allowed in subsequent years , provided capital goods are in possession .However, possession requirement is not necessary in case of components ,spares and accessories ,moulds and dies etc.
(b ) In the following cases 100% credit allowed in the year of acquisition
- If capital goods are removed in the year of acquisition
- Additional duties of customs leviable under section 3(5)
- Units availing SSI Exemption
(c ) Credit is available even if capital goods are acquired on lease ,HP or loan agreement.
(d ) Credit not available if depreciation is claimed on duty element
(e ) Credit can be taken even if the capital goods are received in the premises of the job worker on the direction of the manufacturer or the provider of output service ,as the case may be