Capital Goods - Cenvat Credit

[saket s]

Hi,

We received certain machine in factory during exemption period, can we take Cenvat credit for the same after being brought into tax net. Are there any judgements in this regard?

Thanks

Saket

[Rajagopalan Ranganathan]

Sir,

Rule 6 (1) of Cenvat Credit rules, 2004 provides that " No CENVAT credit shall be allowed on capital goods used exclusively in the manufacture of exempted goods or in providing exempted services for a period of two years from the date of commencement of the commercial production or provision of services, as the case may be, other than the final products or output services 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 or services provided in a financial year:

Provided that where capital goods are received after the date of commencement of commercial production or provision of services, as the case may be, the period of two years shall be computed from the date of installation of such capital goods."

Therefore as per this rule you cannot avail the credit for initial period of two years from date of commencement of commercial production. However after two years you can avail the credit if the goods are declared as not exempted. However if the goods are declared as exempted within two years whether credit can be availed or not is to clarified by CBEC/Government of India (TRU).

[Ajit Ramakrishnan]

The restriction on TWO years quoted above has been inserted this year only .Hence in past cases like off setting demands by Cenvat,the credit can very well be claimed.Otherwise,now after 2 yrs. credit can not be taken as rightly stated above.

AI Summary

Cenvat credit on capital goods restricted during initial period; claimable thereafter once goods cease to be exempt. Cenvat credit on capital goods used exclusively for exempted goods or services is disallowed for an initial restriction period from commencement of commercial production, or from installation if received later; after that period credit may be availed if the goods are not exempt, and situations where goods are declared exempt within the restriction period require administrative clarification.