Cenvat Credit

[CA Rachit Agarwal]

We are manufacturing a commodity which is excisable.

As as an expansion to our existing unit and new products, we have purchased capital goods on which excise duty has been paid. Commercial production will start after 3 years.

Whether we are eligible to avail 50% of Cenvat Credit for the capital goods received during the year of purchase/receipt, although capital goods will be used after 3 years?

[Brijesh Verma]

Dear Rachit Ji

The availability of CENVAT Credit is basically bound by rule 4 of CCR'04. The conditions relevant for capital goods are contained in Rule 4(2) thereof. The condition for availing credit in respect of Capital Goods is merely 'receipt based' and not 'user-based'.

Therefore, you can take 50% in first year notwithstanding year of actual 'put-to-use' of the machinery.

AI Summary

Cenvat credit for capital goods is receipt based, allowing claim in the purchase year despite later put to use. The availability of CENVAT Credit for capital goods is receipt based and not user based; entitlement arises on receipt and a purchaser may avail the prescribed portion of credit in the year of purchase/receipt even if the capital goods will be put to use in a later year.