Rule 4 - Conditions for allowing CENVAT credit - Cenvat Credit Rules, 2004

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 13 [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 service, as the case may be, ]: Provided that in respect of final products, namely, articles of 6 [jewellery or other articles of precious metals falling under heading 7113 or 7114as the case may be] 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 premises 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. 8 [ Provided further that the CENVAT credit in respect of inputs may be taken by the provider of output service when the inputs are delivered to such provider, subject to maintenance of documentary evidence of delivery and location of the inputs.] 10 [ Provided also that the manufacturer or the provider of output service shall not take CENVAT credit after 14 [one year] of the date of issue of any of the documents specified in sub- rule (1) of rule 9.] (2) (a) The CENVAT credit in respect of capital goods received in a factory or in the premises of the provider of output service 4 [or outside the factory of the manufacturer of the final products for generation of electricity for captive use within the factory] 15 [or in the premises of the job worker, in case capital goods are sent directly to the job worker on the direction of the manufacturer or the provider of output service, as the case may be,] 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 the same 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, in respect of capital goods shall be allowed immediately on receipt of the capital goods in the factory of a manufacturer. 2 [ Provided also that where an assessee is eligible to avail of the exemption under a notification based on the value of clearances in a financial year, the CENVAT credit in respect of capital goods received by such assessee shall be allowed for the whole amount of the duty paid on such capital goods in the same financial year. 9 [ Provided also that the CENVAT credit in respect of capital goods may be taken by the provider of output service when the capital goods are delivered to such provider, subject to maintenance of documentary evidence of delivery and location of the capital goods.] 20 [ Explanation . For the removal of doubts, it is hereby clarified that- 26 [ (i) an assessee engaged in the manufacture of articles of jewellery or parts of articles of jewellery or both, falling under heading 7113 of the First Schedule of the Excise Tariff Act , shall be eligible, if his aggregate value of clearances of all excisable goods for home consumption in the preceding financial year, computed in the manner specified in the said notification, did not exceed rupees fifteen crore; ] (ii) an assessee, other than (a) above, shall be eligible, if his aggregate value of clearances of all excisable goods for home consumption in the preceding financial year, computed in the manner specified in the said notification, did not exceed rupees four hundred lakhs.]] (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 1 [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 the 16th day of April, 2002 in his factory. CENVAT of two lakh rupees is paid on this 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( 43 of 1961). (5) 16 [ (a) (i) The CENVAT credit on inputs shall be allowed even if any inputs as such or after being partially processed are sent to a job worker and from there subsequently sent to another job worker and likewise, for further processing, testing, repairing, 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, chal I ans or memos or any other document produced by the manufacturer or the provider of output service taking the CENVAT credit that the inputs or the products produced therefrom are received back by the manufacturer or the provider of output service, as the case may be, within one hundred and eighty days of their being sent from the factory or premises of the provider of output service, as the case may be: Provided that credit shall also be allowed even if any inputs are directly sent to a job worker without their being first brought to the premises of the manufacturer or the provider of output service, as the case may be, and in such a case, the period of one hundred and eighty days shall be counted from the date of receipt of the inputs by the job worker; (ii) the CENVAT credit on capital goods shall be allowed even if any capital goods as such 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 the provider of output service taking the CENVAT credit that the capital goods are received back by the manufacturer or the provider of output service, as the case may be, within two years of their being so sent: Provided that credit shall be allowed even if any capital goods are directly sent to a job worker without their being first brought to the premises of the manufacturer or the provider of output service, as the case may be, and in such a case, the period of two years shall be counted from the date of receipt of the capital goods by the job worker; (iii) if the inputs or capital goods, as the case may be, are not received back within the time specified under sub-clause (i) or (ii), as the case may be, by the manufacturer or the provider of output service, the manufacturer or the provider of output service shall pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods, as the case may be, by debiting the CENVAT credit or otherwise, but the manufacturer or the provider of output service may take the CENVAT credit again when the inputs or capital goods, as the case may be, are received back in the factory or in the premises of the provider of output service. ] 21 [ (b) The CENVAT credit shall also be allowed to a manufacturer of final products in respect of jigs, fixtures, moulds and dies or tools falling under Chapter 82 of the First Schedule to the Excise Tariff Act, sent by such manufacturer to, - (i) another manufacturer for the production of goods; or (ii) a job worker for the production of goods on his behalf, according to his specifications: Provided that such credit shall also be allowed where jigs, fixtures, moulds and dies or tools falling under Chapter 82 of the First Schedule to the Excise Tariff Act , are sent by the manufacturer of final products to the premises of another manufacturer or job worker without bringing these to his own premises. ] (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 input or partially processed inputs outside his factory to a job-worker may, by an order, which shall be 22 [valid for three financial years], 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 [(7) The CENVAT credit in respect of input service shall be allowed, on or after the day on which the invoice, bill or, as the case may be, challan referred to in rule 9 is received: 17 [Provided that in respect of input service where whole or part of the service tax is liable to be paid by the recipient of service, credit of service tax payable by the service recipient shall be allowed after such service tax is paid: Provided further that in case the payment of the value of input service and the service tax paid or payable as indicated in the invoice, bill or, as the case may be, challan referred to in rule 9 is not made within three months of the date of the invoice, bill or, as the case may be, challan, the manufacturer or the service provider who has taken credit on such input service, shall pay an amount equal to the CENVAT credit availed on such input service, except an amount equal to the CENVAT credit of the tax that is paid by the manufacturer or the service provider as reci pi ent of service, and in case the said payment is made, 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: ] 27 [ Provided also that in respect of services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India where service tax is paid by the manufacturer or the provider of output service being importer of goods as the person liable for paying service tax for the said taxable services, credit of service tax paid by the person liable for paying service tax shall be allowed after such service tax is paid: ] Provided also that if any payment or part thereof, made towards an input service is refunded or a credit note is received by the manufacturer or the service provider who has taken credit on such input service, he shall pay an amount equal to the CENVAT credit availed in respect of the amount so refunded or credited: Provided also that CENVAT credit in respect of an invoice, bill or, as the case may be, challan referred to in rule 9, issued before the 1 st day of April, 2011 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. 12 [ Provided that the manufacturer or the provider of output service shall not take CENVAT credit after 18 [one year] of the date of issue of any of the documents specified in sub-rule (1) of rule 9. 24 [ except in case of services provided by Government, local authority or any other person, by way of assignment of right to use any natural resource ]] 25 [Provided also that CENVAT Credit of Service Tax paid in a financial year, on the one-time charges payable in full upfront or in instalments, for the service of assignment of the right to use any natural resource by the Government, local authority or any other person, shall be spread evenly over a period of three years: Provided also tha t where the manufacturer of goods or provider of output service, as the case may be, further assigns such right assigned to him by the Government or any other person, in any financial year, to another person against consideration, such amount of balance CENVAT credit as does not exceed the service tax payable on the consideration charged by him for such further assignment, shall be allowed in the same financial year] 28 [ Provided also that unavailed CENVAT Credit in respect of services provided by the Government, local authority or any other person by way of assignment of the right to use any natural resource on the day immediately preceding the appointed day may be availed of in full on that very day. ] Explanation I.- The amount mentioned in this 19 [rule], unless specified otherwise, shall be paid by the manufacturer of goods or the provider of output service by debiting the CENVAT credit or otherwise on or before the 5th day of the following month except for the month of March, when such payment shall be made on or before the 31st day of the month of March. Explanation II. - If the manufacturer of goods or the provider of output service fails to pay the amount payable under this 19 [rule], it shall be recovered, in the manner as provided in rule 14, for recovery of CENVAT credit wrongly taken. Explanation III.- In case of a manufacturer who avails the exemption under a notification based on the value of clearances in a financial year and a service provider who is an individual or proprietary firm or partnership firm, the expressions, following month and month of March occurring in sub-rule (7) shall be read respectively as following quarter and quarter ending with the month of March.] 29 [ Explanation IV. - unavailed CENVAT credit means the amount that remains after subtracting the amount of CENVAT credit already availed in respect of any service from the aggregate amount of CENVAT credit to which the recipient of such service was entitled to in respect of such service. Explanation V. - appointed day means the date on which the provisions of the Central Goods and Services Tax Act, 2017 (12 of 2017) shall come into force] ********************** Notes: 1. For the words and figures heading No. 68.02 and sub-heading No. 6801.10 , the words and figures heading 6805, grinding wheels and the like, and parts thereof falling under heading 6804 has been substituted vide notification no. 7/2007 CE(NT) dated 21-2-2007 2. Inserted vide notification no. 6/2010 CE(NT) dated 27-2-2010 w.e.f. 1-4-2010 3. Substituted notification no. 6/2010 CE(NT) dated 27-2-2010 w.e.f. 27-2-2010 , before it was read as, (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 4. Inserted vide notification no. 3/2011 CE(NT) dated 1.3.2011 w.e.f. 1.4.2011 5. Inserted vide notification no. 3/2011 CE(NT) dated 1.3.2011 w.e.f. 1.4.2011 6. Substituted vide notification no. 9/2011 CE(NT) dated 24.3.2011 , before it was read as, jewellery falling under heading 7113 7. Substituted vide notification no. 13/2011 CE(NT) dated 31.3.2011 w.e.f. 1.4.2011, before it was read as, (7) The CENVAT credit in respect of input service shall be allowed, on or after the day which payment is made of the value of input service and the service tax paid or payable as is indicated in invoice, bill or, as the case may be, challan referred to in rule 9. 5 [ Provided that if any payment or part thereof, made towards an input service is returned, the manufacturer or the service provider who has taken credit on such input service, shall pay an amount proportionate to the CENVAT credit availed in respect of the amount so returned. Explanation I.- The amount mentioned in this sub-rule, unless specified otherwise, shall be paid by the manufacturer of goods or the provider of output service by debiting the CENVAT credit or otherwise on or before the 5th day of the following month except for the month of March, when such payment shall be made on or before the 31st day of the month of March. Explanation II. - If the manufacturer of goods or the provider of output service fails to pay the amount payable under this sub-rule, it shall be recovered, in the manner as provided in rule 14, for recovery of CENVAT credit wrongly taken. Explanation III.- In case of a manufacturer who avails the exemption under a notification based on the value of clearances in a financial year and a service provider who is an individual or proprietary firm or partnership firm, the expressions, following month and month of March occurring in sub-rule (7) shall be read respectively as following quarter and quarter ending with the month of March.] 8. Inserted vide notification no. 18/2012 CE(NT) dated 17-3-2012 , w.e.f. 1-4-2012 9. Inserted vide notification no. 18/2012 CE(NT) dated 17-3-2012 , w.e.f. 1-4-2012 10. Inserted vide Notification No. 21/2014-Central Excise (N.T.) dated 11th July, 2014 w.e.f. first day of September 2014 11. Substituted vide Notification No. 21/2014-Central Excise (N.T.) dated 11th July, 2014 w.e.f. 11th day of July, 2014, before it was read as, Provided that in case of an input service where the service tax is paid on reverse charge by the recipient of the service, the CENVAT credit in respect of such input service 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: Provided further that in case the payment of the value of input service and the service tax paid or payable as indicated in the invoice, bill or, as the case may be, challan referred to in rule 9 , is not made within three months of the date of the invoice, bill or, as the case may be, challan, the manufacturer or the service provider who has taken credit on such input service, shall pay an amount equal to the CENVAT credit availed on such input service and in case the said payment is made, 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: 12. Inserted vide Notification No. 21/2014-Central Excise (N.T.) dated 11th July, 2014 w.e.f. first day of September, 2014 13. Inserted vide Central Excise - CE (NT) - 06/2015 - 01-03-2015 w.e.f. 1st day of March, 2015 14. Substituted vide Central Excise - CE (NT) - 06/2015 - 01-03-2015 w.e.f. 1st day of March, 2015, before it was read as, six months 15. Inserted vide Central Excise - CE (NT) - 06/2015 - 01-03-2015 w.e.f. 1st day of March, 2015 16. Substituted vide Central Excise - CE (NT) - 06/2015 - 01-03-2015 w.e.f. 1st day of March, 2015, before it was read as, (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 17. Substituted vide Central Excise - CE (NT) - 06/2015 - 01-03-2015 w.e.f. 1st day of April, 2015, before it was read as, 11 [Provided that in respect of input service where whole of the service tax is liable to be paid by the recipient of service, credit shall be allowed after the service tax is paid: Provided further that in respect of an input service, where the service recipient is liable to pay a part of service tax and the service provider is liable to pay the remaining part, the CENVAT credit in respect of such input service 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: Provided also that in case the payment of the value of input service and the service tax paid or payable as indicated in the invoice, bill or, as the case may be, challan referred to in rule 9, except in respect of input service where the whole of the service tax is liable to be paid by the recipient of service, is not made within three months of the date of the invoice, bill or, as the case may be, challan, the manufacturer or the service provider who has taken credit on such input service, shall pay an amount equal to the CENVAT credit availed on such input service and in case the said payment is made, 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 ] 18. Substituted vide Central Excise - CE (NT) - 06/2015 - 01-03-2015 w.e.f. 1st day of April, 2015, before it was read as, six months 19. Substituted vide Central Excise - CE (NT) - 06/2015 - 01-03-2015 w.e.f. 1st day of April, 2015, before it was read as, sub-rule 20. Substituted vide Not. 13/2016 - Dated 1-3-2016, w.e.f. 1st March, 2016, before it was read as, Explanation.- For the removal of doubts, it is hereby clarified that an assessee shall be eligible if his aggregate value of clearances of all excisable goods for home consumption in the preceding financial year computed in the manner specified in the said notification did not exceed rupees four hundred lakhs. 21. Substituted vide Not. 13/2016 - Dated 1-3-2016, w.e.f. 1st April, 2016, before it was read as, 3 [(b) The CENVAT credit shall also be allowed in respect of jigs, fixtures, moulds and dies sent by a manufacturer of final products to,- (i) another manufacturer for the production of goods; or (ii) a job worker for the production of goods on his behalf, according to his specifications] 22. Substituted vide Not. 13/2016 - Dated 1-3-2016, w.e.f. 1st April, 2016, before it was read as, 'valid for a financial year 23. Inserted vide Not. 13/2016 - Dated 1-3-2016, w.e.f. 1st April, 2016 24. Inserted vide Not. 24/2016 - Dated 13-4-2016 25. Substituted vide Not. 24/2016 - Dated 13-4-2016 before it was read as, 23 [Provided also that CENVAT Credit of Service Tax paid on the charges paid or payable for the service provided by way of assignment, by the Government or any other person, of the right to use any natural resource, shall be spread over such period of time as the period for which the right to use has been assigned. CENVAT Credit in the financial year in which the right to use is acquired and in the subsequent years during which such right is retained by the manufacturer of goods or provider of output service as the case may be, shall be taken of an amount determined as per the following formula: Amount of CENVAT Credit that shall be taken in a financial year = Service Tax paid on the charges payable for the assignment of the right to use / No. of Years for which the rights have been assigned Provided also that where the manufacturer of goods or provider of output service, as the case may be, further assigns such right to use assigned to him by the Government or any other person, in any financial year, to another person against a consideration, such amount of balance CENVAT credit as does not exceed the service tax payable on the consideration charged by him for such further assignment, shall be allowed in the same financial year: Provided also that CENVAT credit of annual or monthly user charges payable in respect of any service by way of assignment of right to use natural resources shall be allowed in the same financial year in which they are paid.] 26. Substituted vide Not. 36/2016 - Dated 26-7-2016 , before it was read as, (i) an assessee engaged in the manufacture of articles of jewellery, other than articles of silver jewellery but inclusive of articles of silver jewellery studded with diamond, ruby, emerald or sapphire, falling under chapter heading 7113 of the First Schedule of the Excise Tariff Act, shall be eligible, if his aggregate value of clearances of all excisable goods for home consumption in the preceding financial year, computed in the manner specified in the said notification, did not exceed rupees twelve crore; 27. Inserted vide Not.10/2017 - Dated 13-4-2017, w,e,f, 23rd day of April, 2017 28. Inserted vide Not. 15/2017 - Dated 12-6-2017 29. Inserted vide Not. 15/2017 - Dated 12-6-2017