Seperate account of cenvatable consumables are required under CER 6(3). - Reg.

[Guest]

Dear Sir/s,

We are leading manufacture of industrial products and we have registered in CER.  Very recently AGs audit conducted in our unit and objected that there is no separate cenvat account for dutiable and exempted goods on  LPG & Furnaceoil  cenvat credit.  Expect LPG & Furnaceoil   all other inputs we have maintained separate account as per Rule 6 of CER.   In our account books also we have booked these above two items are under consumables catogery.

Now CE range office issued letter regarding to reverse the cenvat credit  proporniately on the above two inputs (LPG & Furnacoil) . 

Please let us know what is the legal position and  can we reverse the differential credit as per RO letter. 

Regards,

R Nageswar Rao,

8801111356

[Rajesh Nathoo]

Dear  Mr.  Rao,

There is no differentation of Consumables and Inputs for the purpose of  Cenvat Credit . Since LPG and Furnance oil  are used in the manufacture of both dutiable and exempted products , you are liable to reverse the credit . It is a very clearcut point . Reverse the credit as soon as possible .

Amount to be reversed  = Cenvat credit taken on LPG and Furnace Oil x  Tunover of dutiable goods / ( Turnover of dutiable goods + Turnover of Exempted Goods )

AI Summary

Cenvat credit apportionment required where common inputs service both dutiable and exempted goods; reverse credit proportionately. When common inputs or consumables are used for both dutiable and exempted goods, Cenvat credit must be apportioned and the portion attributable to exempted output reversed. There is no separate treatment for consumables versus inputs for credit purposes. The reversal is calculated by applying the ratio of turnover of dutiable goods to the total turnover of dutiable plus exempted goods to the credit claimed on the common input.