Cenvat credit of capital goods purchased before excise registration

[Mehul Pandya]

Sir,

SSI unit have purchased capital goods before 2 years. After that they have taken excise registration as and when they have crossed 1cr. and filling their return time to time. Now in this case unit is eligible to take credit on such capital goods.

Thanking you

[YAGAY and SUN]

Dear Mehul,

You may avail the CENVAT credit on capital goods provided you had not capitalized such capital goods with gross amount as you can avail either CENVAT credit on the Capital goods or Depreciation on the gross amount of capital goods but not the both.

Regards

Team YAGAY & SUN

(Management & Indirect Tax Consultants)

[Rajagopalan Ranganathan]

Sir,

  Rile 6 (4) of CENVAT Credit Rules, 2004 stipulates that-

     " No CENVAT credit shall be allowed on capital goods which are used exclusively in the manufacture of exempted goods or in providing exempted services, other than the final products which are exempt from the whole of the duty of excise leviable thereon under any notification where exemption is granted based upon the value or quantity of clearances made in a financial year."

     The implication of this rule is that cenvat credit of duty paid on the capital goods can be taken while the assessee is availing the SSI exemption, that is, up to Rs. 150 lakhs but the same cannot be utilized.  After crossing this limit and when assessee starts paying the duty he can utilize the credit for payment of duty.  Rule  6 (4) do not lay down any restriction regarding time limit to avail the credit.  Therefore, in my opinion, though you had purchased the capital goods 2 years before taking the registration you can take the credit provided the capital goods are still in use in your factory.  But you have to give reasonable explanation why you have purchased the capital goods 2 years before you contemplate taking registration.

          However, I would like to caution you that the department will not allow the credit on the ground that the credit was not taken within reasonable time. Normally taking credit within 1 year from the date receipt of the capital goods into the factory is presumed that the credit is taken within reasonable  period.   It is an arguable point.

[Mehul Pandya]

Sir,

Thanks for your such valuable reply.

Regards,

Mehul Pandya

[Arun Kumar Singh]

You can avail the cenvat credit on capital goods purchase before registration. 

AI Summary

Cenvat credit on pre-registration capital goods permitted if goods remain in use and reasonable explanation is provided.
Cenvat credit on capital goods purchased before excise registration may be availed if the goods remain in use and the assessee has not claimed depreciation on the gross amount; Rule 6(4) contains no explicit time limit to claim credit, but utilization is constrained while SSI exemption applies and authorities may require a reasonable explanation for delayed claim, with a one-year-from-receipt presumption of timeliness often relied upon.