CENVAT Credit on Capital Goods., Central Excise

[Joginder Pal]

We are erecting a plant at our new factory. For that plant, we have purchased various item like pipes, pumps, heaters instruments and other components. We have paid excise duty on such goods. After erection of the plant, we shall be providing service from this new plant. 

Kindly advise whether

1) we can take CENVAT credit on the same after our registration with Service Tax authoities and what is the maximum limit for claim of CENVAT in a year after its erection?

2) What is the provision for the same and what documents need to be kept for such credit and

3) whether such CENVAT credit can be used for making payment of service tax on the service to be provided by us.

Posts / Replies

[NEERAJ KUMAR, RANCHI]

Please refer to  Cenvat Credit Rule 2004,  Definition of capital goods is not inclusive and I am afraid that many of your iitems may not fall in the category of capital goods.

1. There is no limit, the only condition is that 50% of credit of capital  goods can be taken in a year.

2. the original duty paying central excise invoice is the pproper document.

3. Yes, with certain condiitions.

[Joginder Pal]

Thanks Neeraj for your quick & to the point reply. 

The items which i am using may or may not be capital goods in themselves but what will be erected will be the full fledged plant which will certainly be the capital goods. With regards, my further querry is whether after this plant is completed, can I take the CENVAT credit on these items( may or may not be capital goods themselves) used by me. Kindly give your esteemed advise with provision if possible.

[NEERAJ KUMAR, RANCHI]

Dear Joginder, Please refer to Rule 2(k) of the Cenvat Credit Rule, 2004, I reproduce it here:

(k)	"input" means-
	(i)	all goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as  packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production;
	(ii)	all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service;
		Explanation 1.- The light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever.
		Explanation 2.- Input include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer; but shall not include cement, angles, channels, Centrally Twisted Deform bar (CTD) or Thermo Mechanically Treated bar (TMT) and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods; Here read the lines marked with red.

[Amit Jain]

AS per your query we think u will get cenvat credit on Capital goods which are specified under rule 2 of CCR in which the Capital good are specifically given as below:

Definitions. -   In these rules, unless the context otherwise requires,-

(a) "capital goods" means:-

(A) the following goods, namely:-

(i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading No. 68.05 grinding wheels and the like, and parts thereof falling under heading 6804 of the First Schedule to the Excise Tariff Act;

(ii) pollution control equipment;

(iii) components, spares and accessories of the goods specified at (i) and (ii);

(iv) moulds and dies, jigs and fixtures;

(v) refractories and refractory materials;

(vi) tubes and pipes and fittings thereof; and

(vii) storage tank,

used-

(1) in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in an office:

i.e the goods should be used in the factory is important and if you are using the supra goods mentioned above u can take credit not exceeding 50% in year in which it is used and balance in next year as per Rule 4(2). against the Excise Duty Liability.