Excise CenVat Credit Rules

CENVAT Credit Rules, 2004
1. Short title, extent and commencement.- (1) These rules may be called the CENVAT Credit
Rules, 2004.
(2) They extend to the whole of India:
Provided that nothing contained in these rules relating to availment and utilization of credit of
service tax shall apply to the State of Jammu and Kashmir.
(3) They shall come into force from the date of their publication in the Official Gazette.
2. 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. 68.02
and sub-heading No. 6801.10 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; or
(2) for providing output service;
(B) motor vehicle registered in the name of provider of output service for providing taxable service
as specified in sub-clauses (f), (n), (o), (zr), (zzp), (zzt) and (zzw) of clause (105) of section 65 of
the Finance Act;
(b) "Customs Tariff Act" means the Customs Tariff Act, 1975 (51 of 1975);
(c) "Excise Act" means the Central Excise Act, 1944 (1 of 1944);
(d) "exempted goods" means excisable goods which are exempt from the whole of the duty of
excise leviable thereon, and includes goods which are chargeable to "Nil" rate of duty;
(e) "exempted services" means taxable services which are exempt from the whole of the service
tax leviable thereon, and includes services on which no service tax is leviable under section 66 of
the Finance Act;
(f) "Excise Tariff Act" means the Central Excise Tariff Act, 1985 (5 of 1986);
(g) "Finance Act" means the Finance Act, 1994 (32 of 1994);
(h) "final products" means excisable goods manufactured or produced from input, or using input
service;
(ij) "first stage dealer" means a dealer, who purchases the goods directly from,-
(i) the manufacturer under the cover of an invoice issued in terms of the provisions of Central
Excise Rules, 2002 or from the depot of the said manufacturer, or from premises of the
consignment agent of the said manufacturer or from any other premises from where the goods
are sold by or on behalf of the said manufacturer, under cover of an invoice; or
(ii) an importer or from the depot of an importer or from the premises of the consignment agent of
the importer, under cover of an invoice;
(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;
(l) "input service" means any service,-
(i) used by a provider of taxable service for providing an output service; or
(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of
final products and clearance of final products from the place of removal,and includes services
used in relation to setting up, modernization, renovation or repairs of a factory, premises of
provider of output service or an office relating to such factory or premises, advertisement or sales
promotion, market research, storage upto the place of removal, procurement of inputs, activities
relating to business, such as accounting, auditing, financing, recruitment and quality control,
coaching and training, computer networking, credit rating, share registry, and security, inward
transportation of inputs or capital goods and outward transportation upto the place of removal;
(m) "input service distributor" means an office of the manufacturer or producer of final products or
provider of output service, which receives invoices issued under rule 4A of the Service Tax Rules,
1994 towards purchases of input services and issues invoice, bill or, as the case may be, challan
for the purposes of distributing the credit of service tax paid on the said services to such
manufacturer or producer or provider, as the case may be;
(n) "job work" means processing or working upon of raw material or semi-finished goods supplied
to the job worker, so as to complete a part or whole of the process resulting in the manufacture or
finishing of an article or any operation which is essential for aforesaid process and the expression
"job worker" shall be construed accordingly;
(na) “manufacturer” or “producer” in relation to articles of jewellery falling under heading 7113 of
the First Schedule to the Excise Tariff Act, includes a person who is liable to pay duty of excise
leviable on such goods under sub-rule (1) of rule 12AA of the Central Excise Rules, 2002;
(o) "notification" means the notification published in the Official Gazette;
(p) "output service" means any taxable service provided by the provider of taxable service, to a
customer, client, subscriber, policy holder or any other person, as the case may be, and the
expressions ‘provider’ and ‘provided’ shall be construed accordingly;
Explanation.- For the removal of doubts it is hereby clarified that if a person liable for paying
service tax does not provide any taxable service or does not manufacture final products, the
service for which he is liable to pay service tax shall be deemed to be the output service.
(q) "person liable for paying service tax" has the meaning as assigned to it in clause (d) of subrule
(1) of rule 2 of the Service Tax Rules, 1994;
(r) "provider of taxable service" include a person liable for paying service tax;
(s) "second stage dealer" means a dealer who purchases the goods from a first stage dealer;
(t) words and expressions used in these rules and not defined but defined in the Excise Act or the
Finance Act shall have the meanings respectively assigned to them in those Acts.
3. CENVAT credit.- (1) A manufacturer or producer of final products or a provider of taxable
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;
(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 ( 40 of 1978);
(iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise
(Goods of Special Importance) Act, 1957 ( 58 of 1957);
(v) the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14
of 2001);
(vi) the Education Cess on excisable goods leviable under section 91 read with section 93 of the
Finance (No.2) Act, 2004 (23 of 2004);
(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) and (vi);
“(viia) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act,
as substituted by clause 72 of the Finance Bill, 2005, the clause which has, by virtue of
the declaration made in the said Finance Bill under the Provisional Collection of Taxes
Act, 1931 (16 of 1931), the force of law:
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; and
(x) the Education Cess on taxable services leviable under section 91 read with section 95 of the
Finance (No.2) Act, 2004 (23 of 2004),
(xi) the additional duty of excise leviable under clause 85 of the Finance Bill, 2005, the
clause which has, by virtue of the declaration made in the said Finance Bill under the
Provisional Collection of Taxes Act, 1931 (16 of 1931), the force of law;
paid on-
(i) any input or capital goods received in the factory of manufacture of final product or premises of
the provider of output service on or after the 10th day of September, 2004; and
(ii) 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 of the First
Schedule to the Customs Tariff Act.
(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) an amount equal 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 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),-
(i) No. 32/99-Central Excise, dated the 8th July, 1999 [G.S.R. 508(E), dated 8th July, 1999];
(ii) No. 33/99-Central Excise, dated the 8th July, 1999 [G.S.R. 509(E), dated 8th July, 1999];
(iii) No. 39/2001-Central Excise, dated the 31st July, 2001 [G.S.R. 565 (E), dated the 31st July,
2001];
(iv) No. 56/2002-Central Excise, dated the 14th November, 2002 [G.S.R. 764(E), dated the 14th
November, 2002];
(v) No. 57/2002-Central Excise, dated 14th November, 2002 [G.S.R.. 765(E), dated the 14th
November, 2002];
(vi) No. 56/2003-Central Excise, dated the 25th June, 2003 [G.S.R. 513 (E), dated the 25th June,
2003]; and
(vii) No. 71/2003-Central Excise, dated the 9th September, 2003 [G.S.R. 717 (E), dated the 9th
September, 2003],
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 additional duty leviable under sub-section (5) of section 3
of the Customs Tariff Act, as amended by clause 72 of the Finance Bill, 2005, the clause which
has, by virtue of the declaration made in the said Finance Bill under the Provisional Collection of
Taxes Act, 1931, the force of law, shall be utilised for payment of service tax on any output
service:
Provided also that the CENVAT credit of any duty mentioned in sub-rule (1), other than
credit of additional duty of excise leviable under clause 85 of the said Finance Bill, the clause
which has, by virtue of the declaration made in the said Finance Bill under the Provisional
Collection of Taxes Act, 1931, the force of law, shall not be utilised for payment of said additional
duty of excise on final products.
(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 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 when any capital goods are
removed outside the premises of the provider of output service for providing the output service
and the capital goods are brought back to the premises within 180 days, or such extended period
not exceeding 180 days as may be permitted by the jurisdictional Deputy Commissioner of
Central Excise, or Assistant Commissioner of Central Excise, as the case may be, of their
removal.
(6) The amount paid under sub-rule (5) shall be eligible as CENVAT credit as if it was a duty paid
by the person who removed such goods under sub-rule (5).
(7) Notwithstanding anything contained in sub-rule (1) and sub-rule (4), -
(a) CENVAT credit in respect of inputs or capital goods produced or manufactured, by a hundred
per cent. 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, [G.S.R. 266(E), 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:-
Fifty per cent. 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.
(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 (40 of 1978);
(ii) the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14
of
2001);
(iii) the education cess on excisable goods leviable under section 91 read with section 93 of the
Finance (No.2) Act, 2004 (23 of 2004);
(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 leviable under section 91 read with section 95 of the
Finance (No.2) Act, 2004 (23 of 2004); and
(vii) the additional duty of excise leviable under clause 85 of the Finance Bill, 2005, the clause
which has, by virtue of the declaration made in the said Finance Bill under the Provisional
Collection of
Taxes Act, 1931, the force of law,
shall be utilized only 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 Finance (No.2) Act, 2004, 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 additional duty of excise leviable under clause 85
of the Finance Bill, 2005, the clause which has, by virtue of the declaration made in the said
Finance Bill under the Provisional Collection of Taxes Act, 1931 (16 of 1931), the force of law,
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 education cess on taxable
services can be utilised, either for payment of the education cess on excisable goods or for the
payment of the education cess on taxable services.
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 sub-heading No. 2504.21 or 2504.31 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.
4. Conditions for allowing CENVAT credit.- (1) 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:
Provided that in respect of final products, namely, articles of jewellery falling under heading
7113 of the First Schedule to the Excise Tariff 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.
(2) (a) The CENVAT credit in respect of capital goods received in a factory or in the premises of
the provider of output service 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 the CENVAT credit in respect of capital goods shall be allowed for the whole
amount of the duty paid on such capital goods in the same financial year if such capital goods are
cleared as such in the same financial year.
Provided further that the CENVAT credit of the additional duty leviable under sub-section
(5) of section 3 of the Customs Tariff Act, as amended by clause 72 of the Finance Bill, 2005, the
clause which has, by virtue of the declaration made in the said Finance Bill under the Provisional
Collection of Taxes Act, 1931, the force of law, in respect of capital goods shall be allowed
immediately on receipt of the capital goods in the factory of a manufacturer.
(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 No. 68.02 and sub-heading No. 6801.10 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.
Illustration.- A manufacturer received machinery on the 16th day of April, 2002 in his factory.
CENVAT of two lakh rupees is paid on this machinery. The manufacturer can take credit upto a
maximum of one lakh rupees in the financial year 2002-2003, and the balance in subsequent
years.
(3) The CENVAT credit in respect of the capital goods shall be allowed to a manufacturer,
provider of output service even if the capital goods are acquired by him on lease, hire purchase or
loan agreement, from a financing company.
(4) The CENVAT credit in respect of capital goods shall not be allowed in respect of that part of
the value of capital goods which represents the amount of duty on such capital goods, which the
manufacturer or provider of output service claims as depreciation under section 32 of the Incometax
Act, 1961( 43 of 1961).
(5) (a) The CENVAT credit shall be allowed even if any inputs or capital goods as such or after
being partially processed are sent to a job worker for further processing, testing, repair, reconditioning
or any other purpose, and it is established from the records, challans or memos or
any other document produced by the manufacturer or provider 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 or the capital goods are not received
back within one hundred eighty days, the manufacturer or provider of output service shall pay an
amount equivalent to the CENVAT credit attributable to the inputs or capital goods 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 the provider of output service
(b) The CENVAT credit shall also be allowed in respect of jigs, fixtures, moulds and dies sent by
a manufacturer of final products to a job worker for the production of goods on his behalf and
according to his specifications.
(6) The Commissioner of Central Excise having jurisdiction over the factory of the manufacturer of
the final products who has sent the input or partially processed inputs outside his factory to a jobworker
may, by an order, which shall be valid for a financial year, in respect of removal of such
input or partially processed input, and subject to such conditions as he may impose in the interest
of revenue including the manner in which duty, if leviable, is to be paid, allow final products to be
cleared from the premises of the job-worker.
(7) The CENVAT credit in respect of input service shall be allowed, on or after the day which
payment is made of the value of input service and the service tax paid or payable as is indicated
in invoice, bill or, as the case may be, challan referred to in rule 9.
5. Refund of CENVAT credit.- Where any input or input service is used in the final products which
is cleared for export under bond or letter of undertaking, as the case may be, or used in the
intermediate products cleared for export, or used in providing output service which is exported,
the CENVAT credit in respect of the input or input service so used shall be allowed to be utilized
by the manufacturer or provider of output service towards payment of,
(i) duty of excise on any final products cleared for home consumption or for export on payment of
duty; or
(ii) service tax on output service,
and where for any reason such adjustment is not possible, the manufacturer shall be allowed
refund of such amount subject to such safeguards, conditions and limitations, as may be
specified, by the Central Government, by notification:
Provided that no refund of credit shall be allowed if the manufacturer or provider of output service
avails of drawback allowed under the Customs and Central Excise Duties Drawback Rules, 1995,
or claims a rebate of duty under the Central Excise Rules, 2002, in respect of such duty:
Provided further that no credit of the additional duty leviable under sub-section (5) of section
3 of the Customs Tariff Act, as amended by clause 72 of the Finance Bill, 2005, the clause which
has, by virtue of the declaration made in the said Finance Bill, under the Provisional Collection of
Taxes Act, 1931, the force of law, shall be utilised for payment of service tax on any output
service.
Explanation: For the purposes of this rule, the words ‘output service which is exported’ means the
output taxable services exported in accordance with The Export of Service Rules, 2005.
6. Obligation of manufacturer of dutiable and exempted goods and provider of taxable and
exempted services.- (1) The CENVAT credit shall not be allowed on such quantity of input or
input service which is used in the manufacture of exempted goods or exempted services, except
in the circumstances mentioned in sub-rule (2).
Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in rule
12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in the
manufacture of goods cleared without payment of duty under the provisions of that rule.
(2) Where a manufacturer or provider of output service avails of CENVAT credit in respect of any
inputs or input services, except inputs intended to be used as fuel, and manufactures such final
products or provides such output service which are chargeable to duty or tax as well as exempted
goods or services, then, the manufacturer or provider of output service shall maintain separate
accounts for receipt, consumption and inventory of input and input service meant for use in the
manufacture of dutiable final products or in providing output service and the quantity of input
meant for use in the manufacture of exempted goods or services and take CENVAT credit only
on that quantity of input or input service which is intended for use in the manufacture of dutiable
goods or in providing output service on which service tax is payable.
(3) Notwithstanding anything contained in sub-rules (1) and (2), the manufacturer or the provider
of output service, opting not to maintain separate accounts, shall follow either of the following
conditions, as applicable to him, namely:-
(a) if the exempted goods are-
(i) goods falling within heading No. 22.04 of the First Schedule to the Excise Tariff Act (hereinafter
in this rule referred to as the said First Schedule);
(ii) Low Sulphur Heavy Stock (LSHS) falling within Chapter 27 of the said First Schedule used in
the generation of electricity;
(iii) Naphtha (RN) falling within Chapter 27 of the said First Schedule used in the manufacture of
fertilizer;
(iv) Naptha (RN) and furnace oil falling within Chapter 27 of the said First Schedule used for
generation of electricity;
(v) newsprint, in rolls or sheets, falling within heading No.48.01 of the said First Schedule;
(vi) final products falling within Chapters 50 to 63 of the said First Schedule,
(vii) goods supplied to defence personnel or for defence projects or to the Ministry of Defence for
official purposes, under any of the following notifications of the Government of India in the
Ministry of Finance (Department of Revenue), namely:-
(1) No. 70/92-Central Excise, dated the 17th June, 1992, G.S.R. 595 (E), dated the 17th June,
1992;
(2) No. 62/95-Central Excise, dated the 16th March, 1995, G.S.R. 254 (E), dated the 16th March,
1995;
(3) No. 63/95-Central Excise, dated the 16th March, 1995, G.S.R. 255 (E), dated the 16th March,
1995;
(4) No. 64/95-Central Excise, dated the 16th March, 1995, G.S.R. 256 (E), dated the 16th March,
1995,
the manufacturer shall pay an amount equivalent to the CENVAT credit attributable to inputs and
input services used in, or in relation to, the manufacture of such final products at the time of their
clearance from the factory; or
(b) if the exempted goods are other than those described in condition (a), the manufacturer shall
pay an amount equal to ten per cent. of the total price, excluding sales tax and other taxes, if any,
paid on such goods, of the exempted final product charged by the manufacturer for the sale of
such goods at the time of their clearance from the factory;
(c) the provider of output service shall utilize credit only to extent of an amount not exceeding
twenty per cent. of the amount of service tax payable on taxable output service.
Explanation I.- The amount mentioned in conditions (a) and (b) shall be paid by the manufacturer
or provider of output service by debiting the CENVAT credit or otherwise.
Explanation II.- If the manufacturer or provider of output service fails to pay the said amount, it
shall be recovered along with interest in the same manner, as provided in rule 14, for recovery of
CENVAT credit wrongly taken.
(4) No CENVAT credit shall be allowed on capital goods which are used exclusively in the
manufacture of exempted goods or in providing exempted services, other than the final products
which are exempt from the whole of the duty of excise leviable thereon under any notification
where exemption is granted based upon the value or quantity of clearances made in a financial
year.
(5) Notwithstanding anything contained in sub-rules (1), (2) and (3), credit of the whole of service
tax paid on taxable service as specified in sub-clause (g), (p), (q), (r), (v), (w), (za), (zm), (zp),
(zy), (zzd), (zzg), (zzh), (zzi), (zzk), (zzq) and (zzr) of clause (105) of section 65 of the Finance
Act shall be allowed unless such service is used exclusively in or in relation to the manufacture of
exempted goods or providing exempted services.
(6) The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case the excisable
goods removed without payment of duty are either-
(i) cleared to a unit in a special economic zone; or
(ii) cleared to a hundred per cent. export-oriented undertaking; or
(iii)cleared to a unit in an Electronic Hardware Technology Park or Software Technology Park; or
(iv) supplied to the United Nations or an international organization for their official use or supplied
to projects funded by them, on which exemption of duty is available under notification of the
Government of India in the Ministry of Finance (Department of Revenue) No.108/95-Central
Excise, dated the 28th August, 1995, number G. S R. 602 (E), dated the 28th August, 1995; or
(v) cleared for export under bond in terms of the provisions of the Central Excise Rules, 2002; or
(vi) gold or silver falling within Chapter 71 of the said First Schedule, arising in the course of
manufacture of copper or zinc by smelting; or
(vii) all goods which are exempt from the duties of customs leviable under the First Schedule to
the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable under section 3 of the
said Customs Tariff Act when imported into India and supplied against International Competitive
Bidding in terms of notification No. 6/2002-Central Excise dated the 1st March, 2002.
7. Manner of distribution of credit by input service distributor.- The input service distributor may
distribute the CENVAT credit in respect of the service tax paid on the input service to its
manufacturing units or units providing output service, subject to the following condition, namely:-
(a) the credit distributed against a document referred to in rule 9 does not exceed the amount of
service tax paid thereon; or
(b) credit of service tax attributable to service use in a unit exclusively engaged in manufacture of
exempted goods or providing of exempted services shall not be distributed.
8. Storage of input outside the factory of the manufacturer.- The Deputy Commissioner of Central
Excise or the Assistant 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 limitations and conditions
as he may specify:
Provided that where such input is not used in the manner specified in these rules for any reason
whatsoever, the manufacturer of the final products shall pay an amount equal to the credit availed
in respect of such input.
9. Documents and accounts.- (1) The CENVAT credit shall be taken by the manufacturer or the
provider of output service or input service distributor, as the case may be, on the basis of any of
the following documents, namely :-
(a) an invoice issued by -
(i) a manufacturer for clearance of -
(I) inputs or capital goods from his factory or depot or from the premises of the consignment
agent of the said manufacturer or from any other premises from where the goods are sold by or
on behalf of the said manufacturer;
(II) inputs or capital goods as such;
(ii) an importer;
(iii) an importer from his depot or from the premises of the consignment agent of the said importer
if the said depot or the premises, as the case may be, is registered in terms of the provisions of
Central Excise Rules, 2002;
(iv) a first stage dealer or a second stage dealer, as the case may be, in terms of the provisions of
Central Excise Rules, 2002; or
(b) a supplementary invoice, issued by a manufacturer or importer of inputs or capital goods in
terms of the provisions of Central Excise Rules, 2002 from his factory or depot or from the
premises of the consignment agent of the said manufacturer or importer or from any other
premises from where the goods are sold by, or on behalf of, the said manufacturer or importer, in
case additional amount of excise duties or additional duty leviable under section 3 of the Customs
Tariff Act, has been paid, except where the additional amount of duty became recoverable from
the manufacturer or importer of inputs or capital goods on account of any non-levy or short -levy
by reason of fraud, collusion or any wilful misstatement or suppression of facts or contravention of
any provisions of the Excise Act, or of the Customs Act, 1962 (52 of 1962) or the rules made
there under with intent to evade payment of duty.
Explanation.- For removal of doubts, it is clarified that supplementary invoice shall also include
challan or any other similar document evidencing payment of additional amount of additional duty
leviable under section 3 of the Customs Tariff Act; or
(c) a bill of entry; or
(d) a certificate issued by an appraiser of customs in respect of goods imported through a Foreign
Post Office; or
(e) a challan evidencing payment of service tax by the person liable to pay service tax under subclauses
(iii) and (iv) of clause (d) of sub-rule (1) of rule (2) of the Service Tax Rules, 1994; or
(f) an invoice, a bill or challan issued by a provider of input service on or after the 10th day of,
September, 2004; or
(g) an invoice, bill or challan issued by an input service distributor under rule 4A of the Service
Tax Rules, 1994.
(2) The CENVAT credit shall not be denied on the grounds that any of the documents mentioned
in sub-rule (1) does not contain all the particulars required to be contained therein under these
rules, if such doc ument contains details of payment of duty or service tax, description of the
goods or taxable service, assessable value, name and address of the factory or warehouse or
provider of input service:
Provided that the Deputy Commissioner of Central Excise or the Assistant Commissioner of
Central Excise, as the case may be, having jurisdiction over the factory of a manufacturer or
provider of output service intending to take CENVAT credit, or the input service distributor
distributing CENVAT credit on input service, is satisfied that the duty of excise or service tax due
on the input or input service has been paid and such input or input service has actually been used
or is to be used in the manufacture of final products or in providing output service, then, such
Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the
case may be, shall record the reasons for not denying the credit in each case.
(3) The manufacturer or producer of excisable goods or provider of output servi ce taking
CENVAT credit on input or capital goods or input service, or the input service distributor
distributing CENVAT credit on input service shall take all reasonable steps to ensure that the
input or capital goods or input service in respect of which he has taken the CENVAT credit are
goods or services on which the appropriate duty of excise or service tax as indicated in the
documents accompanying the goods or relating to input service, has been paid.
Explanation.- The manufacturer or producer of excisable goods or provider of output service
taking CENVAT credit on input or capital goods or input service or the input service distributor
distributing CENVAT credit on input service on the basis of, invoice, bill or, as the case may be,
challan received by him for distribution of input service credit shall be deemed to have taken
reasonable steps if he satisfies himself about the identity and address of the manufacturer or
supplier or provider of input service, as the case may be, issuing the documents specified in subrule
(1), evidencing the payment of excise duty or the additional duty of customs or service tax, as
the case may be, either-
(a) from his personal knowledge; or
(b) on the basis of a certificate given by a person with whose handwriting or signature he is
familiar; or
(c) on the basis of a certificate issued to the manufacturer or the supplier or, as the case may be,
the provider of input service by the Superintendent of Central Excise within whose jurisdiction
such manufacturer has his factory or such supplier or provider of output service has his place of
business or where the provider of input service has paid the service tax,
and where the identity and address of the manufacturer or the supplier or the provider of input
service is satisfied on the basis of a certificate, the manufacturer or producer or provider of output
service taking the CENVAT credit or input service distributor distributing CENVAT credit shall
retain such certificate for production before the Central Excise Officer on demand.
(4) The CENVAT credit in respect of input or capital goods 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 or capital goods was
supplied from the stock on which duty was paid by the producer of such input or capital goods
and only an amount of such duty on pro rata basis has been indicated in the invoice issued by
him.
(5) The manufacturer of final products or the provider of output service shall maintain proper
records for the receipt, disposal, consumption and inventory of the input and capital goods in
which the relevant information regarding the value, duty paid, CENVAT credit taken and utilized,
the person from whom the input or capital goods have been procured is recorded and the burden
of proof regarding the admissibility of the CENVAT credit shall lie upon the manufacturer or
provider of output service taking such credit.
(6) The manufacturer of final products or the provider of output service shall maintain proper
records for the receipt and consumption of the input services in which the relevant information
regarding the value, tax paid, CENVAT credit taken and utilized, the person from whom the input
service has been procured is recorded and the burden of proof regarding the admissibility of the
CENVAT credit shall lie upon the manufacturer or provider of output service taking such credit.
(7) The manufacturer of final products shall submit within ten days from the close of each month
to the Superintendent of Central Excise, a monthly return in the form specified, by notification, by
the Board:
Provided that where a manufacturer is availing exemption under a notification based on the value
or quantity of clearances in a financial year, he shall file a quarterly return in the form specified,
by notification, by the Board within twenty days after the close of the quarter to which the return
relates.
(8) A first stage dealer or a second stage dealer, as the case may be, shall submit within fifteen
days from the close of each quarter of a year to the Superintendent of Central Excise, a return in
the form specified, by notification, by the Board.
(9) The provider of output service availing CENVAT credit, shall submit a half yearly return in form
specified, by notification, by the Board to the Superintendent of Central Excise, by the end of the
month following the particular quarter or half year.
(10) The input service distributor, shall submit a half yearly Statement, giving the details of credit
received and distributed during the said half year to the Superintendent of Central Excise, by the
end of the month following the half year.
9A. – Information relating to principal inputs. -
(1) A manufacturer of final products shall furnish to the Superintendent of Central Excise,
annually by 30th April of each Financial Year, a declaration in the Form specified, by a notification,
by the Board, in respect of each of 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:
Provided that for the year 2004-05, such information shall be furnished latest by 31st December,
2004.
(2) If a manufacturer of final products intends to make any alteration in the information so
furnished under sub-rule (1), he 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 Form specified by the Board under sub-rule (1).
(3) A manufacturer of final products shall submit, within ten days from the close of each month,
to the Superintendent of Central Excise, a monthly return in the Form specified, by a notification,
by the Board, in respect of information regarding the receipt and consumption of each principal
inputs with reference to the quantity of final products manufactured by him.
(4) The Central Government may, by notification and subject to such conditions or limitations,
as may be specified in such notification, specify manufacturers or class of manufacturers who
may not be required to furnish declaration mentioned in sub-rule (1) or monthly return mentioned
in sub-rule (3).
Explanation: For the purposes of this rule, “principal inputs”, means any input which is used in
the manufacture of final products where the cost of such input constitutes not less than 10% of
the total cost of raw-materials for the manufacture of unit quantity of a given final products.”
10. Transfer of CENVAT credit.- (1) If a manufacturer of the final products shifts his factory to
another site or the factory is transferred on account of change in ownership or on account of sale,
merger, amalgamation, lease or transfer of the factory to a joint venture with the specific provision
for transfer of liabilities of such factory, then, the manufacturer shall be allowed to transfer the
CENVAT credit lying unutilized in his accounts to such transferred, sold, merged, leased or
amalgamated factory.
(2) If a provider of output service shifts or transfers his business on account of change in
ownership or on account of sale, merger, amalgamation, lease or transfer of the business to a
joint venture with the specific provision for transfer of liabilities of such business, then, the
provider of output service shall be allowed to transfer the CENVAT credit lying unutilized in his
accounts to such transferred, sold, merged, leased or amalgamated business.
(3) The transfer of the CENVAT credit under sub-rules (1) and (2) shall be allowed only if the
stock of inputs as such or in process, or the capital goods is also transferred along with the
factory or business premises to the new site or ownership and the inputs, or capital goods, on
which credit has been availed of are duly accounted for to the satisfaction of the Deputy
Commissioner of Central Excise or, as the case may be, the Assistant Commissioner of Central
Excise.
11. Transitional provision.- (1) Any amount of credit earned by a manufacturer under the
CENVAT Credit Rules, 2002, as they existed prior to the 10th day of September, 2004 or by a
provider of output service under the Service Tax Credit Rules, 2002, as they existed prior to the
10th day of September, 2004, and remaining unutilized on that day shall be allowed as CENVAT
credit to such manufacturer or provider of output service under these rules, and be allowed to be
utilized in accordance with these rules.
(2) A manufacturer who opts for exemption from the whole of the duty of excise leviable on goods
manufactured by him under a notification based on the value or quantity of clearances in a
financial year, and who has been taking CENVAT credit on inputs or input services before such
option is exercised, shall be required to pay an amount equivalent to the CENVAT credit, if any,
allowed to him in respect of inputs lying in stock or in process or contained in final products lying
in stock on the date when such option is exercised and after deducting the said amount from the
balance, if any, lying in his credit, the balance, if any, still remaining shall lapse and shall not be
allowed to be utilized for payment of duty on any excisable goods, whether cleared for home
consumption or for export.
12. Special dispensation in respect of inputs manufactured in factories located in specified areas
of North East region, Kutch district of Gujarat, State of Jammu and Kashmir and State of Sikkim.-
Notwithstanding anything contained in these rules, where a manufacturer has cleared any inputs
or capital goods, in terms of notifications of the Government of India in the Ministry of Finance
(Department of Revenue) No. 32/99- Central Excise, dated the 8th July, 1999 [G.S.R. 508(E),
dated the 8th July, 1999] or No. 33/99- Central Excise, dated the 8th July, 1999 [G.S.R. 509(E),
dated the 8th July, 1999] or No. 39/2001-Central Excise, dated the 31st July, 2001 [G.S.R.
565(E), dated the 31st July, 2001] or notification of the Government of India in the erstwhile
Ministry of Finance and Company Affairs (Department of Revenue) No.56/2002-Central Excise,
dated the 14th November, 2002 [G.S.R. 764(E), dated 14th November, 2002]or No.57/2002-
Central Excise, dated the 14th November, 2002 [ GSR 765(E), dated the 14th November, 2002]
or notification of the Government of India in the Ministry of Finance (Department of Revenue) No.
56/2003-Central Excise, dated the 25th June, 2003 [G.S.R. 513 (E), dated the 25th June, 2003]
or 71/2003-Central Excise, dated the 9th September, 2003 [G.S.R.717 (E), dated the 9th
September, 2003, the CENVAT credit on such inputs or capital goods shall be admissible as if no
portion of the duty paid on such inputs or capital goods was exempted under any of the said
notifications.
13. Power of Central Government to notify goods for deemed CENVAT credit.- Notwithstanding
anything contained in rule 3, the Central Government may, by notification, declare the input or
input service on which the duties of excise, or additional duty of customs or service tax paid, shall
be deemed to have been paid at such rate or equivalent to such amount as may be specified in
that notification and allow CENVAT credit of such duty or tax deemed to have been paid in such
manner and subject to such conditions as may be specified in that notification even if, in the case
of input, the declared input, or in the case of input service, the declared input service, as the case
may be, is not used directly by the manufacturer of final products, or as the case may be, by the
provider of taxable service, declared in that notification, but contained in the said final products, or
as the case may be, used in providing the taxable service.
14. Recovery of CENVAT credit wrongly taken or erroneously refunded.- Where the CENVAT
credit has been taken or utilized wrongly or has been erroneously refunded, the same along with
interest shall be recovered from the manufacturer or the provider of the output service and the
provisions of sections 11A and 11AB of the Excise Act or sections 73 and 75 of the Finance Act,
shall apply mutatis mutandis for effecting such recoveries.
15. Confiscation and penalty.- (1) If any person, takes CENVAT credit in respect of input or
capital goods, wrongly or without taking reasonable steps to ensure that appropriate duty on the
said input or capital goods has been paid as indicated in the document accompanying the input or
capital goods specified in rule 9, or contravenes any of the provisions of these rules in respect of
any input or capital goods, then, all such goods shall be liable to confiscation and such person,
shall be liable to a penalty not exceeding the duty on the excisable goods in respect of which any
contravention has been committed, or ten thousand rupees, whichever is greater.
(2) In a case, where the CENVAT credit in respect of input or capital goods has been taken or
utilized wrongly on account of fraud, willful mis-statement, collusion or suppression of facts, or
contravention of any of the provisions of the Excise Act or the rules made thereunder with
intention to evade payment of duty, then, the manufacturer shall also be liable to pay penalty in
terms of the provisions of section 11AC of the Excise Act.
(3) If any person, takes CENVAT credit in respect of input services, wrongly or without taking
reasonable steps to ensure that appropriate service tax on the said input services has been paid
as indicated in the document accompanying the input services specified in rule 9, or contravenes
any of the provisions of these rules in respect of any input service, then, such person, shall be
liable to a penalty which may extend to an amount not exceeding ten thousand rupees.
(4) In a case, where the CENVAT credit in respect of input services has been taken or utilized
wrongly by reason of fraud, collusion, willful mis-statement, suppression of facts, or contravention
of any of the provisions of the Finance Act or of the rules made thereunder with intention to evade
payment of service tax, then, the provider of output service shall also be liable to pay penalty in
terms of the provisions of section 78 of the Finance Act.
(5) Any order under sub-rule (1), sub-rule (2), sub-rule (3) or sub-rule (4) shall be issued by the
Central Excise Officer following the principles of natural justice.
16. Supplementary provision.- Any notification, circular, instruction, standing order, trade notice or
other order issued under the CENVAT Credit Rules, 2002 or the Service Tax Credit Rules, 2002,
by the Central Government, the Central Board of Excise and Customs, the Chief Commissioner
of Central Excise or the Commissioner of Central Excise, and in force at the commencement of
these rules, shall, to the extent it is relevant and consistent with these rules, be deemed to be
valid and issued under the corresponding provisions of these rules.
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