Conditions for Allowing Cenvat Credit - Cenvat Credit Rules, 2004 - Cenvat Credit - Ready Reckoner [OLD] - Cenvat Credit

Chapter 07 Conditions for allowing Cenvat Credit - Cenvat Credit Rules, 2004 Reference: Cenvat Credit Rules, 2004 Rule 4 FAQ www.taxmanagementindia.com Reply When to take Cenvat credit in relation to inputs? As per Rule 4(1), credit to be taken immediately on receipt of inputs. It is not necessary to take credit as soon as inputs are received in the factory. However manufacturer or service provider should take credit at the earliest. However the manufacturer or the provider of output services shall not take CENVAT credit after one year of the date of issue of any of the documents specified in rule 9(1) . (Refer Notification No. 21/2014-Central Excise (N.T.) dated 11th July, 2014 w.e.f. 1 st day of September 2014 Central Excise - CE (NT) - 06/2015 - 01-03-2015 ) Time limit is only for taking credit. There is no time limit for utilisation of Cenvat credit. The unused Cenvat credit at the year-end can be carried forward. Special provisions have been made in respect of Jewellery or other articles of precious metals, manufactured through Job worker, and in case of a service provider. Whether receipt in factory premises or premises of service provider is necessary? Generally the answer is yes. However exceptions are: In case of service provider receiving inputs / capital goods - Rule 4(1) Rule 4(2)(a) In case of capital goods used for generation of electricity for captive use within the factory 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 - Rule 4(2)(a) How much credit can be availed initially? In case of inputs = 100% In case of capital goods = upto 50% in the initial year. Balance, during any subsequent financial years. 100% credit in case of capital goods in the first year itself? When the capital goods are removal as such in the first year (initial year) itself. Additional duty (SAD) paid u/s 3(5) of Custom Tariff Act TA can be availed during first year itself. Assessee eligible to avail SSI exemption (turnover up to 4 crores during the previous year). Provider of output services may avail credit on capital goods when such goods are delivered to such provider i.e. 100% credit can be availed in first year itself. For availing balance credit during the subsequent year in case of capital goods, physical presence is necessary? The capital goods must be in possession when availing balance of Cenvat credit on capital goods. Rule 4(2)(b) makes certain exceptions. Whether ownership of capital goods is necessary? No. See Rule 4(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. Whether depreciation is allowed in respect of capital goods on Cenvat credit portion? No. See Rule 4(4) Provisions relating to sending of partially processed goods for job work? See Rule 4(5) (Amendment vide notification Central Excise - CE (NT) - 06/2015 - 01-03-2015 ) In case of inputs, goods must be returned within 180 days and in case of capital goods, goods must be returned within 2 years. Credit will be allowed even if inputs / capital goods are directly sent to the job worker without bringing them in the factory or premises of service provider. Reversal and re-credit allowed in case goods returned after 180 days or 2 years as the case may be. Whether final products can be removed / sold directly from the premises of Job Worker Yes, subject to the prior permission. See Rule 4(6) Cenvat Credit on Input Services What are the conditions and safeguards? See Rule 4(7) Credit can be taken on receipt of invoice, bill or documents. Payment against such invoice or bill etc. must be made within 3 months else credit to be reversed. In case of input service, where reverse charge is applicable including partial reverse charge, credit will be available to the service recepient only on payment of service tax to the government.Reversal of credit in case of refund or issuance of credit note. The manufacturer or the provider of output services shall not take CENVAT credit after one year of the date of issue of any of the documents specified in rule 9(1) .( Amendment vide notification Central Excise - CE (NT) - 06/2015 - 01-03-2015 )