AVAILMENT OF CREDIT ON IMPORTED MATERIAL, Central Excise

[SANDESH SHINDE]

Dear Sir, We have imported a material (machine) Capital goods first for trail purpose say in 2013 at that time we had paid appropriate customs duty but we have not availed any credit for the said material at that time.At that time we had not availed any Cenvat credit for the same because this machine was suppose to returned to vendor after successful completion of trail run within 4 months but same not returned till date. Now, we want to procure such machine which is already available at our factory but same not returned till date. Therefore please give us your valuable opinion on above scenario that whether can we avail cenvat credit of such material now.Please give us any references i.e. any case laws regarding this, thanks & regards.

Posts / Replies

[Rajagopalan Ranganathan]

Sir,

In my opinion you cannot take the credit now since the bill of Entry under which the machine was imported dated back beyond one as on date. Notification No. 6/2015-CE dated 1.3.2015 amended third proviso to rule 4 (1) of CENVAT Credit Rules, 2004 stating that "provided also that the manufacturer or the provider of output service shall not take CENVAT credit after ¹⁴[one year] of the date of issue of any of the documents specified in sub- rule (1) of rule 9."

In your case the Bill of Entry is the document based on which you can take credit. Since the Bill of Entry was dated 2013, you are barred by the above proviso from taking credit.

[CA Sumit Aggarwal]

Dear Mr. Sandesh

From you query I am of the view that you bought Capital Goods as defined under CENVAT Credit Rules 2004. This is to clarify here that the proviso to Rule 4(1) apply only to inputs and not on capital goods. Hence, one year condition is applicable only to purchase of inputs.

Further, in case of Capital Goods conditions for allowing CENVAT Credit are defined under Rule 4(2). I am reproducing the same herewith for your reference and to conclude my answer:

Rule 4(2) (a) The CENVAT credit in respect of capital goods received in a factory or in the premises of the provider of output service or outside the factory of the manufacturer of the final products 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, at any point of time in a given financial year shall be taken only for an amount not exceeding fifty per cent. of the duty paid on such capital goods in the same financial year:

Provided that ..........................................

Provided further .......................................

Provided also ...................................................

Provided also that the CENVAT credit in respect of capital goods may be taken by the provider of output service when the capital goods are delivered to such provider, subject to maintenance of documentary evidence of delivery and location of the capital goods.

Explanation.- For the removal of doubts, it is hereby clarified that an assessee shall be "eligible" if his aggregate value of clearances of all excisable goods for home consumption in the preceding financial year computed in the manner specified in the said notification did not exceed rupees four hundred lakhs.

(b) The balance of CENVAT credit may be taken in any financial year subsequent to the financial year in which the capital goods were received in the factory of the manufacturer, or in the premises of the provider of output service, if the capital goods, other than components, spares and accessories, refractories and refractory materials, moulds and dies and goods falling under heading 6805, grinding wheels and the like, and parts thereof falling under heading 6804 of the First Schedule to the Excise Tariff Act, are in the possession of the manufacturer of final products, or provider of output service in such subsequent years.

From the above para, it is apparent to refer the phrase .........taken only for an amount not exceeding fifty per cent (as mentioned in Rule 4(2)(a)); which means that the purchaser of Capital Goods can avail maximum 50% of CENVAT Credit of duty paid in the given financial year in which capital goods were received by the company. From the plain reading; it is clear that Rule define the maximum limit only to avail the CENVAT Credit in the first year. It is not mandatory to avail 50% in the year of receipt itself.

Furthermore, Rule 4(2)(b) support my view as the same start with the words 'The balance....' which mean the balance quantum of CENVAT Credit. It can be 50% or more. Also, Rule 4(2)(b) allows the company to avail the balance amount in any financial year subsequent to the financial year in which the capital goods were received in the factory of the manufacturer. Hence, there is no bar to avail CENVAT Credit on capital goods even after expiry of one year subject to other conditions as mentioned therein.

Hope it will help you.

Thanks!!