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TMI BlogCENVAT CREDIT ON INPUTX X X X Extracts X X X X X X X X Extracts X X X X ..... CENVAT CREDIT ON INPUT - By: - Mr. M. GOVINDARAJAN - Cenvat Credit - Dated:- 3-11-2008 - - INTRODUCTION: A manufacturer or producer of final products or a provider of output service shall be allowed to take credit of excise duty, service tax, education cess etc., against the payment of excise duty or service tax to the credit of the Central Government. The CENVAT credit for the duty paid on inputs may also be taken. The additional duty of excise leviable under Sec. 85 of the finance Act, 2005 paid on any input received in the factory of the manufacture of final product or premises of the provider of output service may also be taken as credit. DEFINITION FOR 'INPUT': Rule 2(k) of CENVAT Cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it Rules, 2004 ('Rule' for short) defines the term 'input' as -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 oil, greases, cutting oils, coolants; § Accessories of the final products cleared along with the final product; § Goods used a 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 purpose, within the factory of production; - all goods, except light diesel oil, high speed diesel oil, m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otor spirit commonly known as petrol and motor vehicles, used for providing any taxable service; The light diesel, high speed oil or motor spirit commonly known as petrol shall not be treated as input for any purpose whatsoever. Input also includes goods used in the manufacture of capital goods which are further used in the factory of the manufacturer. CONDITIONS FOR AVAILING CREDIT: Rule 4 imposes conditions for availing CENVAT credit. The CENVAT Credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of output service. In respect of final products, namely, article of jewellery, falling under 7113 of the First Schedule to the Excise T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ariff Act, the CENVAT credit of duty paid on inputs may be taken immediately on receipt of such inputs in the registered premises of the person who get such final products manufactured on his behalf, on job work basis, subject to the condition that the inputs are used in the manufacture of such final product by the job worker. The CENVAT credit shall be allowed even if any input or capital goods as such or after being partially processed are sent to a job worker for further processing, testing, repair, re-condition or for the manufacture of immediate goods necessary for the manufacture of final product or any other purpose, and it is established from the records, challans or memos or any other document produced by the manufacturer or prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ider of output service taking the CENVAT credit that the goods are received back in the factory within one hundred and eighty days of their being sent to a job worker and if the inputs are not received back within one hundred and eight days the manufacturer or provider of out put service shall pay an equivalent to the CENVAT credit attributable to the inputs by debiting the CENVAT credit or otherwise, but the manufacturer or provider of output service can take the CENVAT credit again when the inputs or capital goods are received back in his factory or in the premises of output service provider. Rule 7A provides that a provider of output service shall be allowed to take credit on inputs on the basis of an invoice or a bill or a challan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by an office or premises of the said provider of output service, which receives invoices, issued in terms of the provisions of Central Excise Rules, 2002 towards the purchase of inputs. Rule 8 provides that the Deputy Commissioner of Central Excise or the Asst. Commissioner of Central Excise, as the case may be, having jurisdiction over the factory of a manufacturer of the final products may, in exceptional circumstances having regard to the nature of the goods and shortage of storage space at the premises of such manufacturer, by an order, permit such manufacturer to store the input in respect of which CENVAT credit has been taken, outside such factory, subject to such limitation and conditions as he may specify. Where such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... input is not used in the manner specified in the rules for any reason whatsoever, the manufacturer of final products shall pay an amount equal to the credit availed in respect of such input. Rule 9(4) provides that the CENVAT credit in respect of input purchased from a first stage dealer or second stage dealer shall be allowed only if such first stage dealer or second stage dealer, as the case may be, has maintained records indicating the fact that the input was supplied from the stock on which the duty was paid by the producer of such input and only an amount of such duty on pro rata basis has been indicated in the invoice issued by him. FURNISHING OF INFORMATION: Rule 9A provides that information relating to principal inputs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to be furnished to the department. The 'Principal inputs' means any input which is used in the manufacture of final products where the cost of such inputs constitutes not less than 10% of the total cost of raw materials for the manufacture of unit quantity of given final products. A manufacturer of final products shall furnish to the Superintendent of Central Excise annually by 30 th April of each financial year, a declaration in the Form specified in respect of each the excisable goods manufactured or to be manufactured by him, the principal inputs and the quantity of such principal inputs required for use in the manufacture of unit quantity of such final products. If a manufacturer of final products intends to make any alterati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in the information furnished above shall furnish information to the Superintendent of Central Excise together with the reasons for such alteration before the proposed change or within 15 days of such change in the specified form. A manufacturer of final product shall submit within 10 days from the close of each month to the Superintendent of Central Excise a monthly return in the specified form in respect of information regarding the receipt and consumption of each principal inputs with reference to the quantity of final products manufactured by him. CASE LAWS: 1. Uttam Sugar Mills Ltd., V. Commissioner of Central Excise, Ghaziabad - 2006 (206) ELT 310 (Tri. Del) Lubricating oils and greases used for lubricating machines and ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chinery used for manufacture of final products. Lubricants are to be treated as 'inputs' since lubrication of machinery is essential for their working and integrally connected with the manufacture. Chemicals used in relation to purification of sugar are essential inputs eligible for credit. 2. Commissioner of Central Excise Customs V. Gujarat Narmada Fertilizers Co., Ltd., - 2006 (193) ELT 136 (Guj) The credit has to be allowed on the entire fuel if the steam generated using it is used within the factory for any purpose including manufacture of electricity irrespective of its used. 3. Gujarat Narmada Valley Fertilizers Co., Ltd., V. Commissioner of Central Excise, Vadodara - 2007 -TMI - 952 - CESTAT,MUMBAI The assessees are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eligible to CENVAT credit duty paid on that quantity of Low Sulphur Heavy Stock which was used for producing steam and electricity used in turn in relation to manufacture of exempted goods, namely fertilizers. 4. Vickers Systems International Ltd., V. Commissioner of Central Excise, Pune - I - 2008 -TMI - 4277 - CESTAT, MUMBAI The appellants procure inputs either domestically or import the same. The appellants also import parts and spares for sales as such in India and not used in manufacturing. The appellants had cleared such imported goods on the payment of duty wherein the assessable value was based on the sale price. The sale price used to have a general mark upto 30% on the landed cost. Hence the sale price was always h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igher than the value plus customs duty at the time of import. Reversal of credit now demanded by the impugned order has already been reversed by the appellants. Duty paid at the time of clearance should be treated as reversal of the alleged ineligible credit. Hence the demand is not maintainable. The entire credit availed on the imported inputs has to be considered as utilized towards the payment of duty on the sale of such imported goods only. Therefore, the department cannot once again demand the reversal, which has already been done. 5. Forbes Gokak Mills Ltd., V. Commissioner of Central Excise, Belgaum - 2007 -TMI - 972 - CESTAT, BANGALORE Inputs are used in the manufacture of dutiable as well as exempted goods. Separ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate accounts are not maintained. However credit availed in respect of manufacture of exempted goods reversed simultaneously. Once credit reversed it can be said that no input credit has been availed. 6. Commissioner of Central Excise V. Ralson India Ltd., 2006 -TMI - 700 - HIGH COURT OF PUNJAB HARYANA (CHANDIGARH) Credit was availed on the basis of original copy of invoice. Credit was denied on the ground that the same was taken without taking/applying for required permission by two lower appellate authorities. As per concurrent findings of fact recorded by two lower appellate authorities, duty paid character of inputs and their receipt in the manufacturer's factory and utilization in manufacture of final product, not in di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spute. Therefore credit shall not be denied. 7. Swaraj Mazda Ltd., V. Commissioner of Central Excise, Ludhiana - 2007 (208) ELT 480 (Tri. Del) Less inputs are received than mentioned in invoices, the fact of which is admitted by the assessee. Inputs like frame complete, lid assay, regulator window, which are parts of motor vehicles, cannot be misplaced during transit. It is a settled law that a manufacturer can avail credit in respect of the duty paid on inputs, which are used in the manufacture of dutiable final product. The credit in respect of the inputs which are not received in the factory in the present case as admitted by the appellant is not admissible. 8. Commissioner of Central Excise, Raipur V. Vandana Energy St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eel Pvt., Ltd., - 2008 -TMI - 2507 - CESTAT, NEW DELHI A manufacturer who wants to take credit of the duty paid on input must base his claim on the duplicate copy of the invoice. In the case the duplicate copy has been lost in transit he can take credit on the basis of the original. Therefore under the scheme of provisions of CENVAT credit, there is no scope for availing credit under the cover of a photocopy of some extra copy of an invoice. - Reply By Krishna Nand Chaubey as = We are doing mining as well as manufacturing of copper concentrate and according to excise tariff act, excise duty levy on copper concentrate under chapter 2603. Right now we are avail cenvat credit on all input and capital goods which is use in mines as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell manufacturing plant. But according to my knowledge I am not sure that we can avail cenvat credit on input and capital goods which is directly used in mining. Please let me know, we can avail cenvat on input and capital goods which we are using in mining. Dated: 5-11-2008 Reply By C.HARIHARAN as = In this article you have mentioned service provider is eligible to take the additional duty as per section 85 of finance act. But in the case of cenvat credit rule provider of taxable service the additional duty mentioned in the sub-section (5) of section 3 of the customs tariff act shall not be eligible to take credit of such additional duty. Sir pls expalin the difference as specified in the 2 different section. Whether both section are say ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the meaning of additional duty as same. Dated: 5-11-2008 Reply By Sudhanshu Kr. singh as = Mr. Govindarajan,....this Article is silent about the reversal of CENVAT Credit. Can you pls. explain (i)what are the circumstances when the crdit can be reversed and (ii) what is the minimum holding period of the Capital Goods. Dated: 5-11-2008 Reply By Pankaj Khara as = Pl explain when a service provider is rendering both taxable and exempt services and wants to avail Input Credit on Service provided to him. No separate accounts are maintained for both services. What are restrictions on availing Input Credit. Dated: 12-11-2008 - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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