Indian Service Tax
The Cenvat Credit Rules, 2004
[Notification No. 23/2004-CE (NT.), dt. 10/9/2004]
In exercise of the powers conferred by Section 37 of the Central Excise, Act, 1944 (1 of 1944) and Section 94 of the Finance Act, 1994 (32 of 1994) and in supersession of the CENV AT Credit Rules, 2002 and the Service Tax Credit Rules, 2002, except as respects things done or omitted, to be done before such supersession, the Central Government hereby makes' the following rules, namely-
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:
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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;
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pollution control equipment;
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components, spares and accessories of the goods specified at (i) and (ii);
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moulds and dies, jigs and fixtures;
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refractories and refractory materials;
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tubes and pipes and fittings thereof; and
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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 (t), (n), (0), (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,
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the manufacturer under the cover of an invoice issued in tenus 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
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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
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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;
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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;
Explanation1
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.
Explanation2
Input include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer;
(1) "input service" means any service,
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used by a provider of taxable service for providing an output service; or
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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;
(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, asthecase 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 liableforpaying service tax does not provide any taxable service or does not manufacture final products, the serviceforwhich he is liable to pay service tax shall be deemed to be the output service.
(q) "person liableforpaying service tax" has the meaning as assigned to it in clause (d) of sub-rule (1) of rule 2 of the Service Tax Rules, 1994;
(r) "provider of taxable service" include a person liableforpaying service tax;
(s) "second stage dealer" means a dealer who purchases the goodsfroma 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
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the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act;
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the duty of excise specified in the Second Schedule to the Excise Tariff Act, leviable under the Excise Act;
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the additional duty of excise leviable under Section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act,1978
(40 of 1978);
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the additional duty of excise leviable under Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act,
1957 ( 58 of 1957);
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the National Calamity Contingent duty leviable under Section 136 of the Finance Act, 2001 (14 of 2001);
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the Education Cess on excisable goods leviable under Section 91 read with Section 93 of the Finance (No.2) Act, 2004
(23 of 2004);
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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);
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the additional duty of excise leviable under Section 157 of the Finance Act, 2003 (32 of 2003)
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the service tax leviable under Section 66 of the Finance Act; and
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the Education Cess on taxable services leviable under Section 91 read with Section 95 of the Finance (No.2) Act, 2004
(23 of 2004), 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 bf India in the Ministry of Finance (Department of Revenue), No. 214/86Central 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 manufacturerforuse 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 S(;hedule to the Customs Tariff Act.
(2) Notwithstanding anything contained in sub-rule (1), the manufacturer or producer of malproducts shall be allowed to bike CENVAT credit of the duty paid on inputs lying in stock or in process or inputs contained in the fmal 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 contamed 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-
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any duty of excise on any final product; or
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an amount equal to CENVAT credit taken on inputs if such inputs are removed as such or after being partially processed; or
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an amount equal to the CENV AT credit taken on capital goods if such capital goods are removed as such; or
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an amount under sub rule (2) of rule 16 of Central Excise Rules 2002; or
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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 it} 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),
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No. 32/99-Central Excise, dated the 8th July, 1999 [G.S.R. 508(E), dated 8th July, 1999];
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No. 33/99-Central Excise, dated the 8th July, 1999 [G.S.R. 509(E), dated 8th July, 1999]
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No. 39/2001-Central Excise, dated the 31st July, 2001 [G.S.R. 565 (E), dated the 31st July, 2001]
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No. 56/2002-Central Excise, dated the 14th November, 2002 [G.S.R. 764(E), dated the 14th November, 2002];
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No. 57/2002-Central Excise, dated 14th November, 2002 [G.S.R.. 765(E), dated the 14th November, 2002];
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No. 56/2003-Central Excise, dated the 25th June, 2003 [G.S.R. 513 (E), dated the 25th June, 2003]; and
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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.
(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 18'0 days as may be pennitted 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,-
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the additional duty of excise leviable under Section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, )978 (40 of 1978);.
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the National Calamity Contingent duty leviable under Section 136 of the Finance Act, 2001 (14 of 2001)
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the Education Cess on excisable goods leviable under Section 91 read with Section 93 of the Finance (No.2) Act, 2004 (23 of 2004)
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he additional duty leviable under Section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii) and (iii);
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the additional duty of excise leviable under Section 157 of the Finance Act, 2003 (32 of 2003); and
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the Education Cess on taxable services leviable under Section 91 read with Section 95 of the Finance (No.2) Act, 2004 (23 Of 2004), 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, or the National Calamity Contingent duty leviable under Section 136 of the Finance Act, 2001 the Education Cess on excisable goods leviable under Section 91 read with Section 93 of the said Finance (No.2) Act, 2004, the additional duty of excise leviable under Section 157 of the said 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, 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.,
Explanation
For 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 utilized towards payment of duty of excise leviable under the First Schedule or the Second Schedule of 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 tile~ 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
(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 CENV AT 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.
(b) The balance of CENV AT 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 m 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 Income-tax 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, re-conditioning 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 provicer 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 worke; 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 job-worker 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 jobworker.
(7) The CENV AT 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 re!ipect 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.
Explanation: For the purposes of this rule, the words 'output service which are exported' means any output service in respect of which payment is received in India in convertible foreign exchange and the same is not repatriated from, or sent outside, India.
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).
(2) Where a manufacturer or provider of output service avails of CENV AT 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-
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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 );
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Low Sulphur Heavy Stock (LSHS) falling within Chapter 27 of the said First Schedule. used in the generation of electricity;
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Naphtha (RN) falling within Chapter 27 of the said First Schedule used in the manufacture of fertilizer;
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Naptha (RN) and furnace oil falling within Chapter 27 of the said First Schedule used for generation of electricity;
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Newsprint, in rolls or sheets, falling within heading No.48.0l of the said First Schedule;
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Final products falling within Chapters 50 to 63 of the said First Schedule,
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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 6th 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 creditor otherwise.
Explanation II
If the manufacturer or provider of omput 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 manufacturt;: 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.10S/ 95-Central Excise, dated the 2Sth August, 1995, number G. S R. 602 (E), dated the 2Sth August, 1995; or
(v) cleared for export under bond in terms of the provisions ofthe Central Excise Rules, 2002; or
(vi) gold or silver falling within q,hapter 71 of the said First Schedule, arising in the course of manufacture of copper or zinc by smelting.
7. Manner of distribution of credit by input service distributor
The input service distributor may distribute the CENV AT 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, name1y:
(a) the credit distributedJ' 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 ?f such manufacturer, by an order, permit such manufacturer to store the input III respect of which CENV AT 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-
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a manufacturer for clearance of -
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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;
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inputs or capital goods as such;
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an importer;
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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;
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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
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a bill of entry; or
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a certificate issued by an appraiser of customs in respect of goods imported through a Foreign Post Office; or
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a challan evidencing payment of service tax by the person liable to pay service tax under sub-clauses (iii) and (iv) of clause
(d) of sub-rule (1) of rule (2) of the Service Tax Rules, 1994; or
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an invoice, a bill or challan issued by a provider of input service on or after the 10th day of, September, 2004; or
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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 (I) does not contain all the particulars equired to be contained therein under these rules, if such document 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 service taking CENV AT credit on input or capital goods or input service, or the input service distributor distributing CENV AT 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 sub-rule (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 were 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 CENV AT 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 rece~pt, 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 oJ 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 retum 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.
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 CENV AT 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 exemptiori 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. 33/99Central 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 31 st 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 llA and IIAB oLthe 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 misstatement, 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 IIAC 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 coptravenes 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 misstatement, 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.
