CENVAT Credit

[RAMESH ANANTHAKRISHNAN]

Dear Sir,

We produce synthetic filaments. Since the CETH for our finished product covers in both exempted and dutiable notification (i.e. 29/2004 & 30/2004) we avail CENVAT credit only to the customers who need CENVAT invoice. Also the credit is availed on monthly basis based on the dutiable product sold in the particular month. Department has raised objection for this procedure and issued Notice under Rule 6(3). We were advised to avail credit on the entire inputs and reverse 5% of the credit whenever we clear exempted items.

 Kindly advise whether the department contention is right.

 

[YAGAY and SUN]

If you availed the CENVAT credit on the inputs which were used in the manufacturing in Dutiable and Exempted goods then, in any case, you would have to adhere the provisions of Rule 6(3) of the CENVAT credit Rules, 2004 as amended from time to time.

Please also check the rate of amount which needs to be reversed i.e. now 6% instead of 5%.

AI Summary

Cenvat credit apportionment: oblige rule-based reversal when inputs serve both dutiable and exempted outputs. When inputs are used to manufacture both dutiable and exempted products, the manufacturer must follow the statutory apportionment and reversal mechanism applicable to such mixed use; the department requires availment on entire inputs with prescribed reversal on exempted clearances, and the current applicable reversal rate has been updated to the presently prescribed rate.