cenvat on capital goods by unit availing ssi exemption

[Priyesh Agrawal]

Dear Sir,

 

A unit is availing benefit of ssi exmeption for year however the receipts crossed 10 lakhs limit in dec. Can he avail cenvat on capital goods which was purchased in the month of May....according to my concept he can avail 100 percent cenvat in year of purchase only after he starts charging Service Tax... 

 

Thanks & Regards

[ADV. DHEERAJ SETHI]

By going to your query, it is not clear whether you are asking for manufacturing industry or a service provider, but as you mentioned 10 lakhs exemption limit, it seems that your question relates to service provider.

In this regard i draw your attention towards the Rule 4 (2)(a) of the Cenvat Credit Rule, 2004:

Rule 4(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 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 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.

         Explanation.- For the removal of doubts, it is hereby clarified that an assessee shall be “eligible” if his aggregate value of clearances of all excisable goods for home consumption in the preceding financial year computed in the manner specified in the said notification did not exceed rupees four hundred lakhs.

(b) 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.

The Central Government clearly mentioned the word - "clearances of all excisable goods" in aforesaid rule for deciding the eligibility criteria for claiming the 100 percent cenvat credit of capital goods in the year of purchased of capital goods.

Hence, the service providers are not eligible to get the benefit of aforesaid rule and you have to take benefit of 50 percent of Cenvat Credit in the Year of purchase of capital goods and balance in any subsequent year.

[rajkumar shukla]

Well explained. I also agree

AI Summary

Cenvat credit on capital goods: service providers generally get only partial credit in year of receipt unless exemption applies. Rule 4(2)(a) allows only fifty per cent of CENVAT credit on capital goods in the financial year of receipt, with the balance in subsequent years, but provides full-year credit where capital goods are cleared as such in the same year or where an assessee is eligible for an exemption based on the value of clearances. The rule's reference to 'clearances of all excisable goods' limits the exemption-based eligibility to situations tied to excisable goods, so service providers availing small service provider exemption are not eligible for full credit in the year of purchase and must take only fifty per cent that year and the balance later.