Q:- Explain the CENVAT credit ? Rules 2004 with its definitions (i) capital goods (ii) Exempted goods (iii) Final product (iv) input (v) inputs services distributor (vi) job work (vii) output (main rule 2 to 15)?
Ans. 1 Rule 2 ---- Definitions
(i) Capital goods
Include components, spares, moulds, dies, refractories, refectory, material, control equipment, tubes, pipes, fitting, pollution control, storage tanks. These goods must use in factory but it does not include office equipment or appliance.
(ii) Exempted goods
It Include all goods which is exempted from duty or duty with Nil rate.
(iii) Final goods
Final goods are goods which produced from inputs.
Inputs is raw material for making output . It use direct or indirect in production.
(v) Important 1st point
High speed diesel oil or motor spirit/patrol is not treat as input.
(a) Lubricating oil, greases, Cutting oil, coolants, paints, fuel, packing material.
(v) Input service distributor:-
Input services distributor is the procedure of final products under service Tax rule 1994 .
(vi) Job work
Job work means processing form R.M. to finished goods
R.M. → Sámi finished goods
(vii) Out put Services
Out put services means any taxable service provided by provider at tax able services.
2. Specified Duties eligible for Rules 3
Manufacture can claim for CENVAT credit.
(i) basic excise duty ******
+ (ii) Special excise duty ******
(iii) Additional duty of excise ******
(iv) National calamite ******
Contingent duty ******
(v) Educational cess *******
(vi) Addition custom duty ******
(vii) Service Tax ******
Total CENVAT Credit
Condition for allowing CENVAT credit
Rule - 4
Normal goods – 100% CENVAT credit allowed immediate on receipt of input.
For capital goods – 50% of duty on input will credit same year. And balance in subsequent year.
Credit allowed to manufacture if he even purchase on lease or loan .
Refund of CENVAT CREDIT – Rule – 5
Suppose we get input (R.M.) = Rs. 100000
After finished it and Send it under bond = Rs. 4, 00,000
Raw material is 10%
CENVAT CREDIT On out put
Net payment= 40,000-10,000= Rs. 30,000
But if credit given more than CENVAT then it will refund the credit
CREDIT - CENVAT
Refund of Cr. = 30,000 – 20,000 = Rs. 10,000
5. Rules of CENVAT cr. For Exempted goods ( Under rule 6 )
(I) CENVAT credit not allowed.
For exempted goods / services
(II) He must record of following exempted goods.
(i) defence projected goods
(iii) New spirit
(iv) Sulphar leavy stock
If he has no separate record then reciprocal
Manufacture pay Amount = CENVAT CR. as penalty to CENVAT Excise department.
(III) If there is exempted but not other and he does not keep record then he will pay 10% of total sale tax of exempted goods.
6. Documents & Accounts – Rule 9
If manufacturer want to get CENVAT Credit , then he will show i) invoice issued by a manufacturer for clearance of input or capital goods from his factory . or by agent goods sold on behalf of manufacturer
ii) supplementary invoice
iii) a bill of entry
iv) a certificate issued by an appraiser of customs in respect of goods imported thru a post office
v) Challan – for payment of service tax
(above photo copies must submit to central excise department)
7. Transfer of CENVAT CREDIT -Rule 10
any business man who is to receive the cenvat credit If he sold his business to any other person then Govt. will transfer his cenvat credit to other person who bought the business.
8. Power of central govt. to notify goods for deemed CENVAT CREDIT (RULE 13)
Central govt. has the power to notify in Gazatte to declare the inputs for deemed CENVAT CREDIT
9. Recover of CENVAT CREDIT wrongly taken:- Rule 14
If manufacturer wrongly taken CENVAT CREDIT then it will recover u/s 11A, 11AB , of Central excise act 1944
10 Penalties RULE 15
If wrong CENVAT CREDIT by fraud
Penalty = RS. 10000 or actual duty which is greater.