Cenvat Credit

[Rizwan Ullah]

Suppose an Assessee is involved in manufacturing of an Excisable product "A" and clearing the same after payment of Excise duty as applicable say 12.5%.

While making that finish product "A" , Assessee is using certain inputs , out of all those inputs used in manufacture of Excisable product "A" one input falls under an exempted category.

Assesse is paying duty on that exempted category input as applicable say 1% .

Is Assessee entitled to take cenvat credit of 1% duty paid on that exempted good which is being used as input in manufacture of dutiable finished product ?

[Rajagopalan Ranganathan]

Sir,

As per rule 2 (d) of Cenvat Credit Rules, 2004 "exempted goods" means excisable goods which are exempt from the whole of the duty of excise leviable thereon, and includes goods which are chargeable to "Nil" rate of duty goods in respect of which the benefit of an exemption under Notification No. 1/2011-CE, dated the 1st March, 2011 or under entries at serial numbers 67 and 128 of Notification No. 12/2012-CE, dated the 17^th March, 2012 is availed.

1% duty (at present it is 2%) duty paid under Notification No. 1/2011-CE, is an exempted goods. therefore no credit is available.

[KASTURI SETHI]

Vey quick and perfect reply by Sh.Ranganathan Sir.

[KASTURI SETHI]

Pl. read 'Very' .

[YAGAY and SUN]

In this query it is not clear who is paying 1% duty. Please clarify.

[Himansu Sekhar]

It is not clear why the assessee will purchase the exempted goods after payment of duty. As the querist mentioned 1%,if it is covered under notf. No. 1/2011 like coal (where the present rate is 1%), they will not get the credit. If the item is not covered under the said not. And exempted,but purchased after paying duty wrongly, as per certain clarification by Board, the credit will not be taken. Some decisions are also there to allow credit to the buyer. But I think credit will not be available as the determination of availabity is determined by Rule 3 and the duty paid is not according to CETA.

[YASHAVANTH RM]

Dear Rizwan,

In my opinion, If main product ( selling goods) are exemption of C.Ex. we are not suppose to take credit of E.D. the cost of the excise duty paid on inputs will be charged to the product on production cost. The producer of the product will also not incurring loss on duty credit, since he has taken the E.D. payable on inputs in material cost. When selling goods are exempted under Duty Tariff no question of taking input credit on input materials. In case of Job work also duty not required to pay while sending / selling the goods through job worker.

Yash-9731300563

AI Summary

Cenvat credit on exempted inputs is not available where the input duty falls under an exemption notification.
Credit of cenvat duty on an input that is classified as an exempted good under the exemption notification is not available; exempted goods are those exempt from the whole of excise duty and include goods made effectively exempt under exemption notifications, so duty paid under such notifications cannot be taken as cenvat credit. Practical issues and some decisions on mistaken payment are noted, but availability is governed by the exempted goods definition and the Cenvat rules, with the duty normally treated as a product cost.