SAD CREDIT

[SHARMA NARAYAN]

Dear sir,

we have received material various ch heading such as 28443090,90229090,90318000,73079990 with Basic Duty & SAD production still not started it will take 2 yrs to start plant

in which registred i take cenvat credit in RG23A OR C how can i show in C 50% Or 100 %

[Rajagopalan Ranganathan]

Sir,

Cenvat Credit Rules, 2004 does not make registration as pre-condition for taking credit of duty paid on inputs, capital goods and input services. Therefore you can take the credit and keep it in your account and use the same for payment of duty when you clear the manufactured product on payment of duty. Since Cenvat Credit Rules, 2004 makes mandatory to take credit within one year from the date of invoice/bill of entry etc., it is advisable to take the credit on receipt of duty paying documents

[KASTURI SETHI]

I support the views of Sh.Rajgopalan Ranganathan, Sir.

[SHARMA NARAYAN]

sir i am taking 50 % of basic Duty in current year and rest 50 % next year and Sad i am taking 100 % credit in current year is thic correct or not pls reply

[KASTURI SETHI]

Credit on SAD is not permissible. SAD is in lieu of VAT/SALE TAX. I also want views of Sh.Rajagopalan Ranganathan, Sir.

[Rajagopalan Ranganathan]

Sir,

Rule 3 (1) (vii a) of Cenvat Credit Rules, 2004 states that "a manufacturer or producer of final products or a provider of output service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act. Provided that a provider of taxable service shall not be eligible to take credit of such additional duty."

From the above it is clear that only provider of taxable service is not eligible to avail the credit of the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act. Since you are a manufacture you are eligible to take credit of SAD.

Rule 4 (2) (a) stipulates that "the CENVAT credit in respect of capital goods received in a factory or in the premises of the provider of output service or outside the factory of the manufacturer of the final products for generation of electricity for captive use within the factory or in the premises of the job worker, in case capital goods are sent directly to the job worker on the direction of the manufacturer or the provider of output service, as the case may be, 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."

In view of this provision you are eligible to take 50% of CVD and SAD paid on capital goods imported by you in the first year and the remaining credit can be taken during any of the subsequent financial years.

[KASTURI SETHI]

Sh.Rajagopalan Ranganathan Ji,

Thank you, Sir.

[Rajagopalan Ranganathan]

Sir,

As per proviso 2 of rule 4 (2) of Cenvat Credit Rules, 2004' the CENVAT credit of the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act (SAD), in respect of capital goods shall be allowed immediately on receipt of the capital goods in the factory of a manufacturer. In view of the above provision 100% credit of SAD paid on imported capital goods can be availed in full in the first financial year itself. Only in respect of CVD 50% of the credit is to be availed in the first financial year and the remaining 50% can be taken during any of the subsequent financial year.

[Ganeshan Kalyani]

Detailed reply of Sri Rajagopalan Sir enriched my knowledge. Thanks.

[Suryanarayana Sathineni]

Dear All,

In addition to the views expressed by our learned friends, I suggest as an abundant caution that since you have not registered with the Department, pl. submit a letter to your Jurisdictional Range office with a copy to the Division office informing about the situation and your taking credit in Cenvat Credit Register and utilize the same after registration and for clearance of manufactured goods. This will, certainly help you in addressing the future queries if, any.

Best Regards

Suryanarayana

[YAGAY andSUN]

It is settled legal position that for availment of CENVAT credit registration is not a precondition.

AI Summary

Cenvat credit eligibility: manufacturers can claim customs additional duty credit on imports, subject to staged capital goods claim rules. Manufacturers may take Cenvat credit for duties on inputs, capital goods and input services prior to registration, subject to the Rules' timing requirements; the additional customs duty component on imported capital goods can be availed immediately on receipt while the countervailing duty component is claimable in a staged manner across financial years. Taxpayers who avail credit before registration should notify their jurisdictional offices and maintain Cenvat Credit Register entries for future validation.