cenvat credit

[mak P]

A Govt.Company manufactures 8 -10 products. Out of which two are excicable. Can the Company claim the cenvat credit for a) service tax paid during the year on security charges / expenses.(b) excise duty paid on procurement of raw materials. Is it that cenvat credit can be availed only on serivce tax and excised duty paid on two prodcuts which are excisable.? or, the entire amount of service tax paid can be availed as modvat credit?

[CA Rachit Agarwal]

As the company manufactures both exempted and excisable products, then Cenvat Credit Rule 6 of the Cenvat Credit Rules, 2004.

As per the said rule, you have to maintain the separate register for the inputs/inputs services for both excisable and non excisable products and accordingly cenvat credit will be allowed.

Otherwise he has to choose one of 2 options as undermentioned:

i) Manufacturer has to pay duty equivalent to 5% of the value of the exempted goods.

ii) Pay the equivalent amount of Cenvat Credit availed on the exempted goods.

[dinesh agrawal]

service tax paid on security charge, being common input service for both excisable as well as exempted goods shall be eligible to full CENVAT credit in view of Rule 6(5) of the CENVAT Rules.

[Ramanujam Varadarajan]

Security charges which are common in nature is eligible for full cenvat credit as per Rule 6(5) of Cenvat credit Rules.

Excise duty paid on raw materials used in relation to excisable goods is eligibel for full credit if separate records available. If not, proporate credit as per formula or payment of 5% on value of exempted goods is required to be made.

AI Summary

Cenvat credit entitlement: common input services can receive full credit; inputs for excisable goods need records or proportionate allocation.
When a manufacturer produces both excisable and exempt goods, Cenvat credit for common input services (e.g., security charges) is eligible in full where treated as common input services, provided accounting permits; excise duty on raw materials is creditable in full only if separate records trace use to excisable goods, otherwise credit must be proportionately allocated by the prescribed formula or neutralised by the specified payment in respect of exempted goods.