Cenvat credit rules

Rule 3. CENVAT credit.-

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

the duty of excise specified in the First Schedule to the Tariff Act, leviable under the Act;
the duty of excise specified in the Second Schedule to the Tariff Act, leviable under the Act;
the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act,1978 ( 40 of 1978);
the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 ( 58 of 1957);
the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001); and
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) and (v) above,

paid on any inputs or capital goods received in the factory on or after the first day of March, 2002, including the said duties paid on any inputs 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 25^th March, 1986, published vide number G.S.R. 547 (E), dated the 25^th March, 1986, and received by the manufacturer for use in, or in relation to, the manufacture of final products, on or after the first day of March, 2002.

Explanation.- For the removal of doubts it is clarified that the manufacturer of the final products shall be allowed CENVAT credit of additional duty leviable under section 3 of the Customs Tariff Act on goods falling under heading 98.01 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 cease to be exempted goods or any goods become excisable.

(3) The CENVAT credit may be utilized for payment of any duty of excise on any final products or for payment of duty on inputs or capital goods themselves if such inputs are removed as such or after being partially processed, or such capital goods are removed as such:

Provided that while paying duty, the CENVAT credit shall be utilised only to the extent such credit is available on the fifteenth day of a month for payment of duty relating to the first fortnight of the month, and the last day of a month for payment of duty relating to the second fortnight of the month or in case of a manufacturer availing exemption by a notification based on value of clearances in a financial year, for payment of duty relating to the entire month.

(4) When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, the manufacturer of the final products shall pay an amount equal to the duty of excise which is leviable on such goods at the rate applicable to such goods on the date of such removal and on the value determined for such goods under sub-section (2) of section 3 or section 4 or section 4A of the Act, as the case may be, and such removal shall be made under the cover of an invoice referred to in rule 7.

(5) The amount paid under sub-rule (4) shall be eligible as CENVAT credit as if it was a duty paid by the person who removed such goods under sub-rule (4).

1. Notwithstanding anything contained in sub-rule (1),-

(a) CENVAT credit in respect of inputs or capital goods produced or manufactured,-

(i) in a free trade zone or by a hundred per cent. export-oriented undertaking or by a unit in an Electronic Hardware Technology Park or Software Technology Park (other than a unit which pays excise duty under section 3 of the Act read with notification No. 8/97- Central Excise, dated the 1^st March, 1997, number G.S.R 114 (E), dated the 1^st March, 1997 or No. 20/2002-Central Excise, dated the 1^st March, 2002) and used in the manufacture of the final products in any other place in India, in case the unit pays excise duty under section 3 of the Act read with notification No. 2/95-Central Excise, dated the 4^th January, 1995, number G.S.R. 189 (E), dated the 4^th January, 1995, 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.

(ii) in a Special Economic Zone, and used in the manufacture of the final products in any other place in India, shall be admissible equivalent to the amount calculated in the following manner, namely:-

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 -

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

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

3. the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001; and

4. the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii) and (iii) above,

shall be utilized only towards payment of duty of excise leviable under the said Additional Duties of Excise (Textiles and Textile Articles) Act, or under the said Additional Duties of Excise (Goods of Special Importance) Act, or the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 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;

(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 Tariff Act shall be allowed to the extent of thirty rupees per square metre;

(d) the CENVAT credit of the duty paid on the inputs shall not be allowed in respect of texturised yarn (including draw-twisted or draw-wound yarn) of polyesters falling under heading No. 54.02 of the First Schedule to the Tariff Act, manufactured by an independent texturiser, that is to say, a manufacturer engaged in the manufacture of texturised yarn (including draw-twisted or draw-wound yarn) of polyesters falling under heading No. 54.02 of the said First Schedule, who does not have the facility in his factory (including plant and machinery) for manufacture of partially oriented yarn of polyesters falling under sub-heading No. 5402.42 of the said First Schedule.

Explanation.- Where the provisions of any other rule or notification provide for grant of partial or full exemption on condition of non-availability of credit of duty paid on any input or capital goods, the provisions of such other rule or notification shall prevail over the provisions of these rules.

Govt.Of India Company manufactures eight to nine products out of which two products are excisable. This being a process industry Only Two Products are exciable and The other products does not fall under the perview of excise.

a. The raw materials procured like chemicals, etc. In some cases excise duty is paid on the rawmaterials procured.

b. Service tax is paid on the expenses of Security forces. However, no clear cut bifurcation is possible nor made to indentify the raw materials procured for each product. Similary the security charges is also for the entire plant and product wise is not identifiable.

c. However for costing purpose a pre-determined per centage is fixed for allocation of the the security

expenses and chemcials..

Pl. clarify:

d Can the Modvat Credit be availed|? if yes, on what basis -

i) Based on the allocations modvat credit can be availed on the excisable products.?

ii )Or can Modvat credit can be avialed on the entire service taxes paid for all the products incling excisable and non - excisable.