Cenvat credit on capital goods

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Ramesh (Querist)
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10 September 2013 An item is procured as a capital item as it falls under chapter 82. however in reality it is a consumable and gets consumed within one year. my query to my dear friends is - should we still utilise only 50% in the second year or is there any notification to entitle 100% credit in the year of purchase. thanks for the interest shown. rgds Ramesh

RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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11 September 2013

Availment of Credit

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 OSP.

An amendment has been made wef 17/3/12 to provide that CENVAT Credit can be taken by a OSP if the inputs/ CG are delivered to such OSP subject to maintenance of documentary evidence of delivery and location of inputs/CG.

i) The CENVAT credit in respect of CG received in a factory or in the premises of the OSP 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 CG in the same financial year. [However, CENVAT credit in respect of CG shall be allowed for the whole amount of the duty paid on such CG in the same financial year if such CG are cleared as such in the same financial year.]

ii) The balance of CENVAT credit may be taken in any financial year subsequent to the financial year in which the CG were received in the factory of the manufacturer, or in the premises of OSP, if the CG are in the possession of the MFP or OSP in such subsequent year.

iii) An amendment has been made w.e.f. 1-4-2010 to provide that SSI units can avail 100% CENVAT Credit on Capital goods in the year of receipt. [SSI unit shall be eligible if aggregate value of clearances of all excisable goods for home consumption in the preceding financial year computed in a prescribed manner does not exceed ` 400 lakhs]

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https://www.bcasonline.org/knowledge/topic_des.asp?893

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Ramesh

Ramesh (Querist)
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12 September 2013 Dear Ramesh Kumar Verma

Thanks for the feedback. To summarise, what you are saying is that there is no provision in Excise Rules to enable Cenvat utilisation at 100% in the year of purchase. We have compulsorily wait for the second year to utilise the balance 50%. Am i right in my understanding.

Thanks