CENVAT Credit – Capital Goods IV

[CA Akash Phophalia]

General Points to consider:-

1. Inputs include capital goods when such capital goods are used as parts or components in the manufacture of final product. If capital goods are not used as parts or components in the manufacture of final product then such goods will not qualify for inputs.
2. Accounting may have different classification of inputs and capital goods.
3. Definition of capital goods is restrictive.
4. CENVAT on capital goods is available immediately on receipt of the same in the factory. Installation of the same is not pre-requisite.
5. Capital Goods purchased on hire purchase or lease or through loan also qualify for CENVAT.
6. Capital goods received by assessee when he was availing SSI exemption, later he took registration when value of clearances crossed exemption limit. CENVAT credit is admissible.
7. Capital goods exclusively used for exempted final products and output services are not eligible for CENVAT credit.
8. If capital goods were initially used for exempted goods but later used for excisable goods, CENVAT credit is available when assessee starts manufacturing excisable goods.
9. Goods manufactured as job work are not exempted goods under CENVAT Credit scheme.
10. Classification done by the suppler cannot be changed by excise officer having jurisdiction over factory of user who is availing CENVAT credit.
11. Restriction of utilization of 50% CENVAT credit in the first year applies to all duties.
12. If assessee takes credit of full amount in one year then interest is payable on the 50% in addition to its reversal in the first year.

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

Discussions to this article

[MAHESH MAIYA]

Dear Sir,

Thank you very much for your valuable inputs.

However, as per your point no. 11, restriction of utilization of 50% CENVAT credit in the first year applies to all duties.

As per Rule 4 2(a) of CCR 2004, Cenvat credit of 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. As per the same, there is no restriction for utilisation of addtional duty. The same can be taken credit to the extent of 100%.

[CA Akash Phophalia]

Dear Sir

Thanks a lot.

I truly agree with your remark.

Humble Regards

[Pradeep Khatri]

Nice Compilation. Congratulations