Thursday, October 22, 2015

CENVAT Credit

ALSO APPLICABLE FOR NOVEMBER - 2015 EXAM

(1) A manufacturer or producer of final products or a provider of output service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of -

i. the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act (basic excise duty)

Provided that CENVAT credit of such duty of excise shall not be allowed to be taken when paid on any goods -

  • in respect of which the benefit of an exemption under notification No.1/2011-CE, dated the 1st March, 2011 is availed; or
  • specified in serial numbers 67 and 128 in respect of which the benefit of an exemption under Notification No. 12/2012-CE,dated the 17th March, 2012 is availed ".

ii. the duty of excise specified in the Second Schedule to the Excise Tariff Act, leviable under the Excise Act;

iii.  the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act,1978.

iv.  the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957.

v.  NCCD

vi.  the Education Cess on excisable

  • the Secondary and Higher Education Cess on excisable goods

vii.  the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv), (v) (vi) and (via);

Provided that CENVAT credit shall not be allowed in excess of 85%. of the additional duty of customs paid under sub-section (1) of section 3 of the Customs Tariff Act, on ships, boats and other floating structures for breaking up falling under tariff item 8908 00 00 of the First Schedule to the Customs Tariff Act

  • vii (a).  the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act,(SPECIAL CVD) Provided that a provider of taxable service shall not be eligible to take credit of such additional duty;

viii.  the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of 2003);

ix.  the service tax leviable under section 66 of the Finance Act;
       ix (b).  the service tax leviable under section 66B of the Finance Act;",

x.  the Education Cess on taxable services and
     x(a).  the Secondary and Higher Education Cess on taxable and

(xi) the additional duty of excise on pan masala and tobacco products leviable under section 85 of Finance Act, 2005

Provided that the CENVAT credit shall be allowed to be taken of the amount equal to central excise duty paid on the capital goods at the time of de-bonding of the unit in terms of the para 8 of notification No. 22/2003-Central Excise,i.e exempts certain goods when brought into 100% EOU/STP complex

paid on-
  1. any input or capital goods received in the factory of manufacture of final product or by the provider of output service and
  2. any input service received by the manufacturer of final product or by the provider of output services (on or after the 10th day of September, 2004, including the said duties, or tax, or cess paid on any input or input service, as the case may be, used in the manufacture of intermediate products, by a job-worker availing the benefit of exemption specified in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 214/86- Central Excise, dated the 25th March, 1986, published in the Gazette of India vide number G.S.R. 547 (E), dated the 25th March, 1986, and received by the manufacturer for use in, or in relation to, the manufacture of final product, on or after the 10th day of September, 2004.)
Explanation. - For the removal of doubts it is clarified that the manufacturer of the final products and the provider of output service shall be allowed CENVAT credit of additional duty leviable under section 3 of the Customs Tariff Act on goods falling under heading 9801(project imports)of the First Schedule to the Customs Tariff Act.

IMPORTANT DECISIONS

V.G. Steel Industryv CCE (2011) 271 ELT 508 (P&H)
held that even if the duty has been paid in excess of what is to be paid, unless the excess duty paid has been refunded, the purchaser assesse could claim credit of the duties actually paidand department cannot deny the same.

Mahaveer Surfectants(P) Ltd. v. CCE, (2009) 233 E.L.T. 109 (Tri. -Chennai)
where the price of the product was reduced subsequent to availment of credit, the Department sought to deny credit on the ground that Rule 3(1) credit could be taken only to the extent duty was ‘leviable’, it was held that CENVAT credit on inputs is available to a manufacturer of final products to the extent of the duty leviable on such inputs and paid by the input-manufacturer/supplier.

(2) Notwithstanding anything contained in sub-rule (1), the manufacturer or producer of final products shall be allowed to take CENVAT credit of the duty paid on inputs lying in stock or in process or inputs contained in the final products lying in stock on the date on which any goods manufactured by the said manufacturer or producer cease to be exempted goods or any goods become excisable.

(3) Notwithstanding anything contained in sub-rule (1), in relation to a service which ceases to be an exempted service, the provider of the output service shall be allowed to take CENVAT credit of the duty paid on the inputs received on and after the 10th day of September, 2004 and lying in stock on the date on which any service ceases to be an exempted service and used for providing such service.

(4) The CENVAT credit may be utilized for payment of -

a.  any duty of excise on any final product; or

b.  anamountequal to CENVAT credit taken on inputs if such inputs are removed as such or after being partially processed; or

c.  an amount equal to the CENVAT credit taken on capital goods if such capital goods are removed as such; or

d.  an amount under sub rule (2) of rule 16 of Central Excise Rules, 2002; or

e.  service tax on any output service:

Provided that while paying duty of excise or service tax, as the case may be, the CENVAT credit shall be utilized only to the extent such credit is available on the last day of the month or quarter, as the case may be, for payment of duty or tax relating to that month or the quarter, as the case may be:

Provided further that CENVAT credit shall not be utilised for payment of any duty of excise on goods in respect of which the benefit of an exemption under notification No. 1/2011-CE, dated the 1st March, 2011 is availed

Provided also that the CENVAT credit of the duty, or service tax, paid on the inputs, or input services, used in the manufacture of final products cleared after availing of the exemption under the following notifications of Government of India in the Ministry of Finance (Department of Revenue),- shall, respectively, be utilized only for payment of duty on final products, in respect of which exemption under the said respective notifications is availed of :

Provided also that no credit of the (SPECIAL CVD) additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, shall be utilized for payment of service tax on any output service:

Provided also that the CENVAT credit of any duty specified in sub-rule (1), except the National Calamity Contingent(NCCD) duty in item (v) thereof, shall not be utilized for payment of the said National Calamity Contingent duty on goods falling under tariff items 8517 12 10 and 8517 12 90 respectively of the First Schedule of the Central Excise Tariff:

Provided also that the CENVAT credit of any duty specified in sub-rule (1) shall not be utilized for payment of the Clean Energy Cess leviable under section 83 of the Finance Act, 2010.

Provided also that the CENVAT credit of any duty mentioned in sub-rule (1), other than credit of additional duty of excise leviable under section 85 of Finance Act, 2005, shall not be utilised for payment of said additional duty of excise on final products.

Explanation. - CENVAT credit cannot be used for payment of service tax in respect of services where the person liable to pay tax is the service recipient"

(5) When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, or premises of the provider of output service, the manufacturer of the final products or provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in rule 9:

Provided that such payment shall not be required to be made where any inputs or capital goods are removed outside the premises of the provider of output service for providing the output service:

Provided further that such payment shall not be required to be made where any inputs are removed outside the factory for providing free warranty for final products



5A(a). If the capital goods, on which CENVAT credit has been taken, are removed after being used, the manufacturer or provider of output services shall pay an amount equal to the CENVAT Credit taken on the said capital goods reduced by the percentage points calculated by straight line method as specified below for each quarter of a year or part thereof from the date of taking the CENVAT Credit, namely:-

i.  for computers and computer peripherals:

  • for each quarter in the first year @ 10%
  • for each quarter in the secondyear @ 8%
  • for each quarter in the third year @ 5%
  • for each quarter in the fourth and fifth year @ 1%

ii.  for capital goods, other than computers and computer peripherals @ 2.5% for each quarter:
Provided that if the amount so calculated is less than the amount equal to the duty leviable on transaction value, the amount to be paid shall be equal to the duty leviable on transaction value.

         b.  If the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value."(27.09.2013)


5B.  If the value of any,
  1. input, or
  2.  capital goods before being put to use on which CENVAT credit has been taken is written off fully or partially or where any provision to write off fully or partially has been made in the books of account then”the manufacturer or service provider, as the case may be, shall pay an amount equivalent to the CENVAT credit taken in respect of the said input or capital goods:
Provided that if the said input or capital goods is subsequently used in the manufacture of final products or the provision of output services, the manufacturer or output service provider, as the case may be, shall be entitled to take the credit of the amount equivalent to the CENVAT credit paid earlier subject to the other provisions of these rules.


Explanation.  If the manufacturer of goods or the provider of output service fails to pay the amount payable under sub-rules (5), (5A), and (5B), it shall be recovered, in the manner as provided in rule 14, for recovery of CENVAT credit wrongly taken.”(01.03.2013)

Circular No.: 990/14/2014-CX-8 dt 19.11.2014
According to Rule 3(5B) of CCR, 2004, if the value of any input or capital goods before being put to use on which CENVAT Credit has been taken, is written off or such provisions made in Books of Account, the manufacturer or service provider is required to pay an amount equal to credit so taken. However, when the inputs or capital goods are subsequently used, the amount so paid can be re-credited in the account. the limitation of six months would apply when the credit is taken for the first time on an eligible document. It would not apply for taking re-credit of amount reversed, after meeting the conditions prescribed in these rule

PQR Ltd., a manufacturer of excisable goods, purchased in the month of April, 2014 inputs for Rs.1,00,000/- on which it pays excise duty of Rs.12,360/-. The company utilised the aforementioned CENVAT of ` 12,360/ - while discharging its excise duty liability for the month of April, 2014. In June, 2014 before the said inputs are put into use, the company has written off ` 20,000 out of the total inputs. The balance inputs of ` 80,000 were not written off.
What economic consequences the company has to face for writing off of ` 20,000/-. However, subsequently, in the month of December, 2014, the company puts to use the entire inputs of Rs.1, 00,000/-. Can the company get some economic benefit now?(PM-4)

Answer
Rule 3(5B) of CENVAT Credit Rules, 2004 requires a manufacturer or service provider to pay an amount equivalent to the CENVAT credit taken in respect of inputs or capital goods when the value of such inputs or capital goods is written off fully or partially before being put to use.

Thus, PQR Ltd. will have to pay an amount equivalent to the CENVAT credit taken on inputs valuing Rs.20,000(inputs written off) which is Rs.2,472 (12,360/1, 00,000 × 20,000) in June, 2014. However, proviso to rule 3(5B) provides that if the said inputs or capital goods is subsequently used in the manufacture of final products or the provision of output service, the manufacturer or output service provider, shall be entitled to take credit of the amount equivalent to the CENVAT credit paid earlier subject to the other provisions of CCR, 2004. Thus, in the present case, by virtue of proviso to rule 3(5B) when in December, 2014, the company puts to use entire inputs of Rs.1,00,000; the company will be entitled to take credit of the amount equivalent to the CENVAT credit paid earlier i.e. Rs.2,472/-.

5C.  Where on any goods manufactured or produced by an assessee, the payment of duty is ordered to be remitted under rule 21 of the Central Excise Rules, 2002, the CENVAT credit taken on the inputs used in the manufacture or production of said goods and the CENVAT credit taken on input services used in or inrelation to the manufacture or production of said goods(08.01.2014)shall be reversed.


Explanation 1.- The amount payable under sub-rules (5), (5A), (5B) and (5C), unless specified otherwise, shall be paid by the manufacturer of goods or the provider of output service by debiting the CENVAT credit or otherwise on or before the 5th day of the following month except for the month of March, where such payment shall be made on or before the 31st day of the month of March.(08.01.2014)

Explanation 2.- If the manufacturer of goods or the provider of output service fails to pay the amount payable under sub-rules (5), (5A), (5B) and (5C), it shall be recovered, in the manner as provided in rule 14, for recovery of CENVAT credit wrongly taken and utilised.(08.01.2014)

Can CENVAT credit availed on inputs (contained in the work-in-progress destroyed on account of fire) be ordered to be reversed under rule 3(5C) of the CENVAT Credit Rules, 2004?(RTP-NOV-2015)(RTP-M-2015)

CCE v. Fenner India Limited 2014 (307) ELT 516 (Mad.)

High Court‟s Decision: The High Court held that CENVAT credit would need to be reversed only when the payment of excise duty on final product is ordered to be remitted under rule 21 of the Central Excise Rules, 2002, which deals with the remission of duty. In the present case, the assessee has not claimed any remission and no final product has been removed, hence, assessee need not reverse the CENVAT credit taken on inputs (contained in the work-in-progress) destroyed in fire.

The goods manufactured by a company have been destroyed in a fire. The payment of duty has been ordered to be remitted. Is the company required to reverse the CENVAT credit taken on input services used in manufacture of such destroyed goods?(PM-5)

Answer
As per rule 3(5C) of the CENVAT Credit Rules, 2004, where on any goods manufactured by an assessee, the payment of duty is ordered to be remitted under rule 21 of the Central Excise Rules 2002, the credit taken on input services used in/in relation to manufacture or production of said goods has to be reversed.

(6) The amount paid under sub-rule (5) and sub-rule (5A) shall be eligible as CENVAT credit as if it was a duty paid by the person who removed such goods under sub-rule (5) and sub-rule (5A).

(7)  Notwithstanding anything contained in rule3(1) and rule3(4),-

(a) CENVAT credit in respect of inputs or capital goods produced or manufactured, by a 100%export-oriented undertaking or by a unit in an Electronic Hardware Technology Park or in a Software Technology Park other than a unit which pays

excise duty levied under section 3 of the Excise Act read with serial numbers 3,5, 6 and 7 of notification No. 23/2003-Central Excise, dated the 31st March, 2003, and used in the manufacture of the final products or in providing an output service, in any other place in India, in case the unit pays excise duty under section 3 of the Excise Act read with serial number 2 of the notification No. 23/2003-Central Excise, dated the 31st March, 2003, [G.S.R. 266(E), dated the 31st March, 2003], shall be admissible equivalent to the amount calculated in the following manner, namely:-

50% of [X multiplied by {(1+BCD/100) multiplied by (CVD/100)}], where BCD and CVD denote ad valorem rates, in per cent., of basic customs duty and additional duty of customs leviable on the inputs or the capital goods respectively and X denotes the assessable value:

Provided that the CENVAT credit in respect of inputs and capital goods cleared on or after 1st March, 2006 from an export oriented undertaking or by a unit in Electronic Hardware Technology Park or in a Software Technology Park, as the case may be, on which such unit pays exciseduty under section 3 of the Excise Act read with serial number 2 of the notification no. 23/2003-Central Excise dated 31st March, 2003shall be equal to {X multiplied by [(1+BCD/200) multiplied by (CVD/100)]}.

Provided further that the CENVAT credit in respect of inputs and capital goods cleared on or after the 07.09.2009from an export-oriented undertaking or by a unit in Electronic Hardware Technology Park or in a Software Technology Park, as the case may be, on which such undertaking or unit has paid -
  • (A) excise duty leviable under section 3 of the Excise Act read with serial number 2 of the notification no. 23/2003-Central Excise, dated 31st March, 2003 and
  • (B)the Education Cess leviable under section 91 read with section 93 of the Finance (No. 2)Act, 2004 and the Secondary and Higher Education Cess leviable under section 136 read with section 138 of the Finance Act, 2007, on the excise duty referred to in (A),
shall be the aggregate of -

(I) that portion of excise duty referred to in (A), as is equivalent to -

  • (i) the additional duty leviable under sub-section (1) of section 3 of the Customs Tariff Act(countervailing Duty), which is equal to the duty of excise under clause (a) of sub-section (1) of section 3 of the Excise Act;
  • (ii)    the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act(special countervailing duty @ 4%); and
(II) the Education Cess and the Secondary and Higher Education Cess referred to in (B).

(b) CENVAT credit in respect of -

(i) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978
(ii) the National Calamity Contingent duty
(iii) the education cess on excisable goods
(iiia) the Secondary and Higher Education Cess on excisable
(iv) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under items (i), (ii) and (iii) above;
(v) the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of 2003); (vi) the education cess on taxable services
(via) the Secondary and Higher Education Cess on taxable services
(vii) the additional duty of excise leviable on pan masala and tobacco products under section 85 of Finance Act, 2005

shall be utilised towards payment of duty of excise or as the case may be, of service tax leviable under the said Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 or the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001), or the education cess on excisable goods leviable under section 91 read with section 93 of the said Finance (No.2) Act, 2004 or the Secondary and Higher Education Cess on excisable goods leviable under section 136 read with section 138 of the Finance Act, 2007 or the additional duty of excise leviable under section 157 of the Finance Act, 2003, or the education cess on taxable services leviable under section 91 read with section 95 of the said Finance (No.2) Act, 2004, or the Secondary and Higher Education Cess on taxable services leviable under section 136 read with section 140 of the Finance Act, 2007, or the additional duty of excise leviable under section 85 of the Finance Act, 2005 respectively, on any final products manufactured by the manufacturer or for payment of such duty on inputs themselves, if such inputs are removed as such or after being partially processed or on any output service:

Provided that the credit of the education cess on excisable goods and the education cess on taxable services can be utilized, either for payment of the education cess on excisable goods or for the payment of the education cess on taxable services:

Provided further that the credit of the Secondary and Higher Education Cess on excisable goods and the Secondary and Higher Education Cess on taxable services can be utilized, either for payment of the Secondary and Higher Education Cess on excisable goods or for the payment of the Secondary and Higher Education Cess on taxable services

Provided also that the credit of Education Cess and Secondary and Higher Education Cess paid on inputs or capital goods received in the factory of manufacture of final product on or after the 1st day of March, 2015 can be utilized for payment of the duty of excise leviable under the First Schedule to the Excise Tariff Act: (30.04.2015)

Provided also that the credit of balance fifty per cent. Education Cess and Secondary and Higher Education Cess paid on capital goods received in the factory of manufacture of final product in the financial year 2014 -15 can be utilized for payment of the duty of excise specified in the First Schedule to the Excise Tariff Act: (30.04.2015)

Provided also that the credit of Education Cess and Secondary and Higher Education Cess paid on input services received by the manufacturer of final product on or after the 1st day of March, 2015 can be utilized for payment of the duty of excise specified in the First Schedule to the Excise Tariff Act(30.04.2015)

Explanation - For the removal of doubts, it is hereby declared that the credit of the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) paid on or after the 1st day of April, 2000, may be utilised towards payment of duty of excise leviable under the First Schedule or the Second Schedule to the Excise Tariff Act.

(c) the CENVAT credit, in respect of additional duty leviable under section 3 of the Customs Tariff Act, paid on marble slabs or tiles falling under tariff items 2515 12 20 and 2515 12 90 respectively of the First Schedule to the Excise Tariff Act shall be allowed to the extent of thirty rupees per square meter; Explanation.- Where the provisions of any other rule or notification provide for grant of whole or part exemption on condition of non-availability of credit of duty paid on any input or capital goods, or of service tax paid on input service, the provisions of such other rule or notification shall prevail over the provisions of these rules.

Can CENVAT credit of duties, other than National Calamity Contingent Duty (NCCD), be used to pay NCCD? (RTP-N-2014)(SCL-1)

CCEx. v. Prag Bosimi Synthetics Ltd. 2013 (295) ELT 682 (Gau.)

Decision: The High Court held that merely because CENVAT credit in respect of NCCD can be utilized only for payment of NCCD, it does not lead to the conclusion that credit of any other duty cannot be utilized for payment of NCCD.

Note: Fourth proviso to rule 3(4) of the CENVAT Credit Rules, 2004 provides that in case of mobile phones, credit of only NCCD can be utilised for payment of the NCCD payable thereon. In other words, in the absence of the credit of NCCD, NCCD payable on mobile phones will have to be paid in cash (even if credit of other duties/tax is available) as no other credit can be utilized to pay such duty.


0 comments:

Post a Comment

Copyright © 2015 Accounting & Taxation All Right Reserved
Subscribe by Email Get Free Updates
Don't Forget To Join US Our Community
×
blogger