Cenvat credit accumulation

As per clause a and clause b of sub rule 2 of rule 4 of CCR 2004, "The CENVAT credit in respect of capital goods received in a factory or in the premises of the provider of output service or outside the factory of the manufacturer of the final products for generation of electricity for captive use within the factory, 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,  in respect of capital goods shall be allowed immediately on receipt of the capital goods in the factory of a manufacturer.

Provided also that where an assessee is eligible to avail of the exemption under a notification based on the value of clearances in a financial year, the CENVAT credit in respect of capital goods received by such assessee shall be allowed for the whole amount of the duty paid on such capital goods in the same financial year.

Provided also that the CENVAT credit in respect of capital goods may be taken by the provider of output service when the capital goods are delivered to such provider, subject to maintenance of documentary evidence of delivery and location of the capital goods.

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 6805, grinding wheels and the like, and parts thereof falling under heading 6804 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."

Based on the reading of the above provisions, it can be said that the CENVAT credit on Capital goods have to be claimed in two financial years. The CENVAT credit once claimed may be utilsed anytime in the subsequent financial years.

Also, you need to consider that a proviso has been added in both Rule 4(1) and 4(7) relating to credit in respect of input and input services that the manufacturer or the provider of output service shall not take CENVAT credit after six months of the date of issue of any of the documents specified in sub-rule (1) of rule 9.Thus, if bill of purchases of inputs or input services is dated 1-9-2014, the credit can be taken maximum by 1-3-2015.

sir, if i am not mistaken, accumulation is possible. So, once we start rendering "services" we are able to utilise this accumulated credit to set off our service tax liabilities. 

Also sir 1 more question, the substantial amount of service tax paid on consultation fees for creation of the capital asset falls under "cenvat on Cap. Goods". 

Thanks.

Dear Anoop, 

That is what I said that you may show the cenvat credit available inthe return of service tax and then you may utilise the same in the subsequent financial years.

Your second question, "the substantial amount of service tax paid on consultation fees for creation of the capital asset falls under "cenvat on Cap. Goods"?" is a question over which professionals have taken different stands.

As per my view, YES!!!. service tax paid on consultation fees for creation of the capital asset falls under "cenvat on Cap. Goods".

thank you sir for the valuable inputs.