CENVAT ON CAPITAL GOODS

[Sandeep Aggarwal]

Dear All

Please see the attached queries:

1. If goods covered under the Chapters 80,82,84..(Capital Goods) but are used as part or component of final product , do we need to take cenvat (@50 %) in two installments if final product removes or sale out in the same year. Can the same be treated as input and cenvat be availed 100%?

2. Is there any notification regarding non reversal of cenvat credit on tools, dies, jigs, fixtures, moulds etc when the same is sent for job worker for further processing of intermediate goods and the same do not come back within 180 days ( rather scrapped at job worker's end to produce intermediate goods)?

Thanks 

SANDEEP AGGARWAL

[Mahir S]

1. Full cenvat credit is admissible only if the captial goods are removed as such in the same financial year but if the captial goods are to be used in the manufacture of final products, then only 50 % cenvat credit available in the said financial year and remaining in the next financial year. In this regard please refer to sub rule 2 (a)  of rule 4 of Cenvat Credit Rules 2004 and the Explanation referred therein, as detailed below for reference : -

4. Conditions for allowing CENVAT credit.-

(2) (a) The CENVAT credit in respect of capital goods received in a factory 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:

     Provided that the CENVAT credit in respect of capital goods shall be allowed for the whole amount of the duty paid on such capital goods in the same financial year if such capital goods are cleared as such in the same financial year.

     Provided further that the CENVAT credit of the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, in respect of capital goods shall be allowed immediately on receipt of the capital goods in the factory of a manufacturer.

     ²[Provided also that where an assessee is eligible to avail of the exemption under a notification based on the value of clearances in a financial year, the CENVAT credit in respect of capital goods received by such assessee shall be allowed for the whole amount of the duty paid on such capital goods in the same financial year.

     Explanation.- For the removal of doubts, it is hereby clarified that an assessee shall be "eligible" if his aggregate value of clearances of all excisable goods for home consumption in the preceding financial year computed in the manner specified in the said notification did not exceed rupees four hundred lakhs.]

      (b) The balance of CENVAT credit may be taken in any financial year subsequent to the financial year in which the capital goods were received in the factory of the manufacturer, or in the premises of the provider of output service, if the capital goods, other than components, spares and accessories, refractories and refractory materials, moulds and dies and goods falling under heading ¹[6805, grinding wheels and the like, and parts thereof falling under heading 6804] of the First Schedule to the Excise Tariff Act, are in the possession of the manufacturer of final products, or provider of output service in such subsequent years.

 2.  Plase refer to sub rule 5 (b) of rule 4  of  Cenvat Credit Rule, 2004 for clarification on job work query.

[Ram Niwas]

Dear Sir,

As per my view If goods covered under the Chapters 80,82,84..(Capital Goods) but are used as part or component of final product it should be treatd as input material and take credit 100% in same year.

 

Thanks

Ram

AI Summary

CENVAT on capital goods: staggered credit in year of receipt unless goods are cleared as such, then full credit applies. CENVAT credit on capital goods is time limited: partial credit may be taken in the year of receipt with the balance in subsequent years unless the capital goods are cleared as such in that same year, when full credit is allowed; an eligibility exception permits immediate full credit for assessees covered by certain exemption notifications. For items sent for job work that do not return within the prescribed period, the specific sub rule governs whether reversal is required.