CENVAT Credit – Capital Goods III
CENVAT Credit Rules on Capital Goods:-
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Rule
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Provision
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Rule 3(5)
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When capital goods are removes as such from the factory or the premises of service provider then the amount of credit taken on capital goods needs to be reversed.
The removal ha to be made under the cover of Invoice.
The rule is not applicable on temporary removal of capital goods for provision of service.
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Rule 3 (5A)(a)
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If the capital goods, on which CENVAT credit has been taken, are removed after being used, the manufacturer or provider of output services shall pay an amount equal to the CENVAT credit taken on the said capital goods reduced by the percentage points calculated by straight line method as specified for computers and computer peripherals and capital goods other than computer and computer peripherals.
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Rule 3(5A)(b)
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If the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value.
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Rule 3(5B)
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If capital goods are written off fully or partially, before being put to use, then the CENVAT on the same shall be reversed.
If such capital goods are used in the business again then the credit may be taken back.
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Rule 3(5C)
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The duty paid or reversed under Rule 3(5) and 3(5A) shall be eligible as CENVAT credit.
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Rule 4(2)
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In the same financial year upto 50% of the CENVAT credit is available.
Balance 50% can be claimed in the subsequent year.
CENVAT credit in respect of capital goods shall be allowed for the whole amount of duty paid on such capital goods in the same financial year if such capital goods are cleared as such in the same financial year.
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.
Where an assessee is the 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.
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Rule 4 (3)
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The CENVAT credit in respect of the capital goods shall be allowed even if the capital goods are acquired by him on lease, hire purchase or loan agreement, from a financing company
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Rule 4 (4)
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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 claims as depreciation under section 32 of Income Tax Act, 1961.
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Rule 4 (5)(a)
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The CENVAT Credit shall be allowed even if capital goods as such or after being partially processed are sent to a job worker for further processing, testing, repair, re-conditioning or any other purpose, taking the CEVAT credit that the goods are received back in the factory within one hundred and eighty days of their being sent and if the capital goods are not received back within one hundred and eighty days, the provider shall pay an amount equivalent to the CENVAT credit. But the credit can be retaken when Capital goods are received back.
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Rule 6(4)
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No CENVAT credit shall be allowed on capital goods which are used exclusively in the manufacture of exempted goods or in providing exempted services other than final products which are exempt from the whole of the duty of excise leviable thereon under any notification where exemption is granted based upon the value or quantity of clearances made in a financial year.
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Rule 7A(1)
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A provider of output service shall be allowed to take credit on capital goods received, on the basis of an invoice or a bill or a challan issued by an office or premises of the provider, which receives invoices, issued in terms of the provision of the Central Excise Rules, 2002, towards the purchase of capital goods.
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Rule 9(1)
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The CENVAT credit shall be taken by the Service provider on the basis of invoice or supplementary invoice, issued by a manufacturer for clearance of capital goods from his factory or depot or from the premises of the consignment agent, from where the goods are sold.
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Rule 9(4)
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The CENVAT credit of capital goods purchased from a first stage dealer or second stage dealer shall be allowed only if such dealer, has maintained records indicating the fact that the capital goods was supplied from the stock on which duty was paid by the producer of such capital goods and an amount of such duty has been indicated in the invoice.
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Rule 10(3)
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The transfer of the CENVAT credit shall be allowed only if capital goods is transferred along with the factory or business premises to the new site or ownership and the capital goods, on which credit has been availed of are duly accounted for to the satisfaction of Deputy Commissioner of Central Excise or, as case may be, the Assistant Commissioner of Central Excise.
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Rule 15(2)
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In a case, where the CENVAT credit of capital goods has been taken or utilized wrongly by the reason of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of the Excise Act, or of the rules made thereunder with intent to evade payment of duty, then the manufacturer shall also be liable to pay penalty in terms of the provisions of section 11AC of the Excise Act.
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Rule 15(3)
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In a case, where the CENVAT credit of capital goods has been taken or utilized wrongly by reason of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of the Finance Act, or the rules made thereunder with intent to evade payment of service tax , then the provider of output service shall be liable to pay penalty in terms of the provisions of section 78 of the Finance Act.
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CA Akash Phophalia
Chartered Accountant
(BCOM (HONS), MCOM (FandT), CS, DISA, Certified Indirect Taxation of ICAI)
Office No 203, Amrit Kalash,
Residency Road, Near Bombay Motor Circle
Jodhpur – 342001
Rajasthan
0291-2640225, 9799569294
9911796707
