AN OVERVIEW OF CENVAT CREDIT RULES, 2004 - Central Excise Practice Manual (OLD) - Central Excise

PART- II: AN OVERVIEW OF CENVAT CREDIT RULES, 2004 1. IMPORTANT PROVISIONS RELATING TO CENVAT CREDIT 1. The concept of Cenvat credit: Excise duty is paid on the manufactured goods. The final product of a manufacturer is used by another person as input or capital goods or consumable for production/manufacture of his goods. When such duty paid goods are used by another manufacturer, the duty suffered on the said goods is required to be offset, as otherwise, it would result in payment of duty on the duty already paid. In order to overcome the cascading effect as a result of duty on duty, Cenvat credit scheme has been introduced as per which the value addition of the goods alone is subjected to duty at every stage of manufacture. The conditions and procedures for availment of Cenvat credit are prescribed under the Cenvat Credit Rules, 2004 (hereinafter referred to as CCR). Under this scheme, a manufacturer can take credit of Excise duty paid on the inputs or capital goods or Service Tax paid on the input services and utilize the same for payment of duty on the final products manufactured by him. Similarly, the service provider may also avail the Cenvat credit for payment of Service Tax on the output services provided by him. Cenvat credit is admissible on the (i) inputs, (ii) capital goods and (iii) input services.