Rule 8 - Obligation of a manufacturer or producer of final products. - CENVAT Credit Rules, 2017

Obligation of a manufacturer or producer of final products. - 8. (1) The CENVAT credit shall not be allowed on such quantity of input as is used in or in relation to the manufacture of exempted goods and their clearance upto the place of removal and the credit not allowed shall be calculated and paid by the manufacturer, in terms of the provisions of sub-rule (2) or sub-rule (3), as the case may be. Explanation 1.- For the purposes of this rule, exempted goods or final products as defined in clauses (d) and (e) of rule 2 shall include non-excisable goods cleared for a consideration from the factory. Explanation 2.- Value of non-excisable goods for the purposes of this rule, shall be the invoice value and where such invoice value is not available, such value shall be determined by using reasonable means consistent with the principles of valuation contained in the Excise Act and the rules made there under. (2) A manufacturer who exclusively manufactures exempted goods for their clearance upto the place of removal shall pay the whole amount of credit of input and shall, in effect, not be eligible for credit of any inputs. (3) (a) A manufacturer who manufactures two classes of goods, namely :- (i) non-exempted goods removed; (ii) exempted goods removed, shall follow any one of the following options applicable to him, namely :- (i) pay an amount equal to six per cent . of value of the exempted goods subject to a maximum of the total of opening balance of the credit of input available at the beginning of the period to which the payment relates and the credit of input taken during that period; or (ii) pay an amount as determined under sub-rule (4): Provided that if any duty of excise is paid on the exempted goods, the same shall be reduced from the amount payable under clause (i): Explanation 1.- If the manufacturer of goods avails any of the option under this sub-rule, he shall exercise such option for all exempted goods manufactured by him and such option shall not be withdrawn during the remaining part of the financial year. Explanation 2.- No CENVAT credit shall be taken on the duty paid on any goods that are not inputs. Explanation 3.- For the purposes of this sub-rule and sub-rule (4),- (a) non-exempted goods removed means the final products excluding exempted goods manufactured and cleared upto the place of removal; (b) exempted goods removed means the exempted goods manufactured and cleared upto the place of removal; (4) For determination of amount required to be paid under clause (ii) of sub-rule (3), the manufacturer of goods shall follow the following procedure and conditions, namely:- (a) the manufacturer of goods shall intimate in writing to the Superintendent of Central Excise giving the following particulars, namely :- (i) name, address and registration number of the manufacturer of goods; (ii) date from which the option under this clause is exercised or proposed to be exercised; (iii) description of inputs used exclusively in or in relation to the manufacture of exempted goods removed and description of such exempted goods; (iv) description of inputs used exclusively in or in relation to the manufacture of non-exempted goods removed and description of such non-exempted goods removed; (v) CENVAT credit of inputs lying in balance as on the date of exercising the option under this condition; (b) the manufacturer of final products shall determine the credit required to be paid, out of this total credit of inputs taken during the month, denoted as T , in the following sequential steps and provisionally pay every month, the amounts determined under sub-clauses (i) and (iv), namely:- (i) the amount of CENVAT credit attributable to inputs used exclusively in or in relation to the manufacture of exempted goods removed shall be called ineligible credit, denoted as A , and shall be paid; (ii) the amount of CENVAT credit attributable to inputs used exclusively in or in relation to the manufacture of non-exempted goods removed shall be called eligible credit, denoted as B , and shall not be required to be paid; (iii) credit left after attribution of credit under sub-clauses (i) and (ii) shall be called common credit, denoted as C and calculated as,- C = T - (A + B); Explanation .- Where the entire credit has been attributed under sub-clauses (i) and (ii), namely ineligible credit or eligible credit, there shall be left no common credit for further attribution. (iv) the amount of common credit attributable towards exempted goods removed shall be called ineligible common credit, denoted as D and calculated as follows and shall be paid, - D = (E/F) x C; where E is the sum total of value of exempted goods removed, during the preceding financial year; where F is the sum total of - (a) value of non-exempted goods removed, and (b) value of exempted goods removed, during the preceding financial year: Provided that where no final products were manufactured in the preceding financial year, the CENVAT credit attributable to ineligible common credit shall be deemed to be fifty per cent. of the common credit; (v) remainder of the common credit shall be called eligible common credit and denoted as G, where,- G = C - D; Explanation .- For the removal of doubts, it is hereby declared that out of the total credit T , which is sum total of A, B, D, and G, the manufacturer shall be able to attribute provisionally and retain credit of B and G, namely, eligible credit and eligible common credit and shall provisionally pay the amount of credit of A and D, namely, ineligible credit and ineligible common credit; (vi) where manufacturer fails to pay the amount determined under sub-clause (i) or sub-clause (iv), he shall be liable to pay the interest from the due date of payment till the date of payment of such amount, at the rate of fifteen per cent . per annum; (c) the manufacturer shall determine the amount of CENVAT credit attributable to exempted goods removed for the whole of financial year, out of the total credit denoted as T (Annual) taken during the whole of financial year in the following manner, namely :- (i) the CENVAT credit attributable to inputs used exclusively in or in relation to the manufacture of exempted goods removed on the basis of inputs actually so used during the financial year, shall be called Annual ineligible credit and denoted as A (Annual); (ii) the CENVAT credit attributable to inputs used exclusively in or in relation to the manufacture of non-exempted goods removed on the basis of inputs actually so used shall be called Annual eligible credit and denoted as B (Annual); (iii) common credit left for further attribution shall be denoted as C(Annual) and calculated as, - C (Annual) = T(Annual) - [A(Annual) + B(Annual)]; (iv) common credit attributable towards exempted goods removed shall be called Annual ineligible common credit, denoted by D (Annual) and shall be calculated as, - D (Annual) = (H/I) x C(Annual); where H is sum total of value of exempted goods removed during the financial year; where I is sum total of - (a) value of non-exempted goods removed; and (b) value of exempted goods removed; during the financial year; (d) the manufacturer shall pay on or before the 30th June of the succeeding financial year, an amount equal to difference between the total of the amount of Annual ineligible credit and Annual ineligible common credit and the aggregate amount of ineligible credit and ineligible common credit for the period of whole year, namely:- [{A(Annual) + D(Annual)} - {(A+D) aggregated for the whole year)}], where the former of the two amounts is greater than the later; (e) where the amount under clause (d) is not paid by the 30th June of the succeeding financial year, the manufacturer of goods, shall, in addition to the amount of credit so paid under clause (d), be liable to pay on such amount an interest at the rate of fifteen per cent. per annum, from the 30th June of the succeeding financial year till the date of payment of such amount; (f) the manufacturer, shall at the end of the financial year, take credit of amount equal to difference between the total of the amount of the aggregate of ineligible credit and ineligible common credit paid during the whole year and the total of the amount of annual ineligible credit and annual ineligible common credit, namely, [{(A+D) aggregated for the whole year)} - {A(Annual) + D(Annual)}], where the former of the two amounts is greater than the later; (g) the manufacturer of the goods shall intimate to the jurisdictional Superintendent of Central Excise, within a period of fifteen days from the date of payment or adjustment, as per the provisions of clauses (d), (e) and (f), the following particulars, namely :- (i) details of credit attributed towards eligible credit, ineligible credit, eligible common credit and ineligible common credit, month-wise, for the whole financial year, determined as per the provisions of clause (b); (ii) CENVAT credit annually attributed to eligible credit, ineligible credit, eligible common credit and ineligible common credit for the whole of financial year, determined as per the provisions of clause (c); (iii) amount determined and paid as per the provisions of clause (d), if any, with the date of payment of the amount; (iv) interest payable and paid, if any, determined as per the provisions of clause (e); and (v) credit determined and taken as per the provisions of clause (f), if any, with the date of taking the credit. (5) Where a manufacturer has failed to exercise the option under sub-rule (3) and follow the procedure provided under sub-rule (4), the Central Excise Officer competent to adjudicate a case based on amount of CENVAT credit involved, may allow such manufacturer to follow the procedure and pay the amount referred to in clause (ii) of sub-rule (3), calculated for each of the months, mutatis-mutandis in terms of clause (c) of sub-rule (4), with interest calculated at the rate of fifteen per cent . per annum from the due date for payment of amount for each of the month, till the date of payment thereof. (6) Payment of an amount under sub-rule (3) shall be deemed to be CENVAT credit not taken for the purpose of an exemption notification wherein any exemption is granted on the condition that no CENVAT credit of inputs shall be taken. Explanation I. Value for the purpose of sub-rules (3) and (4) shall have the same meaning as assigned to it under section 3 , 4 or 4A of the Excise Act , read with rules made thereunder; Explanation II. - The amount mentioned in sub-rules (3) and (4), unless specified otherwise, shall be paid by the manufacturer of goods 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 III. - If the manufacturer of goods fails to pay the amount payable under sub-rules (3) and (4), it shall be recovered, in the manner as provided in rule 16, for recovery of CENVAT credit wrongly taken. Explanation IV.- In case of a manufacturer who avails the exemption under a notification based on the value of clearances in a financial year, the expressions, following month and month of March occurring in sub-rules (3) and (4) shall be read respectively as following quarter and quarter ending with the month of March . (7) The provisions of sub-rules (1), (2) and (3) shall not be applicable in case the excisable goods removed without payment of duty are either- (i) cleared to a unit in a special economic zone or to a developer of a special economic zone for their authorised operations ; or (ii) cleared to a hundred per cent . export-oriented undertaking; or (iii) supplied to the United Nations or an international organisation for their official use or supplied to projects funded by them, on which exemption of duty is available under notification of the Government of India in the Ministry of Finance (Department of Revenue) No.108/95-Central Excise, dated the 28th August, 1995, number G. S R. 602 (E), dated the 28th August, 1995 ; or (iv) supplied for the use of foreign diplomatic missions or consular missions or career consular offices or diplomatic agents in terms of the provisions of notification No. 12/2012-CE, dated the 17th March, 2012, number G.S.R. 163(E), dated the 17th March, 2012 ; or (v) cleared for export under bond in terms of the provisions of the Central Excise Rules, 2017 .