CENVAT CREDIT

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CENVAT CREDIT
by g. natarajan, advocate swamy associates
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CONCEPT OF CENVAT CREDIT

• Milestones 1986, 1994 2004.
• Inputs.
• Capital Goods.
• Input Services.

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INPUTS

• Inputs definition amended from 01.04.2011.
• - all goods used in the factory
• - accessories cleared along with final
  product
• - goods meant for free warranty
• - all goods used for generation of
  electricity / steam
• - all goods used for providing output
  service.
• Exclusions
• - Diesel, Petrol
• - goods used for construction, foundation,
  support
• structures
• - Capital goods, except when used as parts
  of
• final products
• - Goods primarily used for personal use by
  employees
• - Goods having no nexus to manufacture.

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CAPITAL GOODS

• capital goods means -
• (A) the following goods, namely -
• all goods falling under Chapter 82, Chapter 84,
  Chapter 85, Chapter 90, heading 6805, grinding
  wheels
• and the like, and parts thereof falling
  under heading 6804 of the First Schedule to the
  Excise Tariff Act
• (ii) pollution control equipment
• (iii) components, spares and accessories of the
  goods specified at (i) and (ii)
• (iv) moulds and dies, jigs and fixtures
• (v) refractories and refractory materials
• (vi) tubes and pipes and fittings thereof and
• (vii) storage tank,
• used -
• in the factory of the manufacturer of the final
  products, but does not include any equipment or
  appliance
• used in an office or
• (1A) used outside the factory of the
  manufacturer for generation of electricity for
  captive use within the factory or
• (2) for providing output service
• motor vehicle registered in the name of provider
  of output service for providing taxable service
  as
• specified in sub-clauses (f), (n), (o),
  (zr), (zzp), (zzt) and (zzw) of clause (105) of
  section 65 of the Finance Act

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INPUT SERVICE
Input service definition amended. - used
for providing output service - used by a
manufacturer of final products, whether directly
or indirectly, in or in relation to manufacture
and clearance of final products up to place of
removal and includes services used in relation
to modernisation, renovation or repairs of a
factory, premises of provider of output service
or an office relating to such factory or
premises, advertisement or sales promotion,
market research, storage upto the place of
removal, procurement of inputs, accounting,
auditing, financing, recruitment and quality
control, coaching and training, computer
networking, credit rating, share registry,
security, business exhibition, legal services,
inward transportation of inputs or capital goods
and outward transportation upto the place of
removal.
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INPUT SERVICES

• Exclusions.
• - Architect, Port Service, Airport Services,
  commercial or industrial
• construction, construction of residential
  complex, works contract
• service if used for construction of
  building / civil structure or for
• laying of foundation / structures for
  capital goods except where
• the output services are also the above.
• - Insurance of vehicles, rent a cab, service
  center, supply of tangible
• goods (vehicles), except for courier, tour
  operator, rent a cab,
• cargo handling, GTA, outdoor catering,
  pandal and shamiana.
• - Employee welfare services.

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RULE 6

• Exempted Vs Taxable activity.
• Maintenance of separate records for
• Inputs / Input Services or both.
• Formula based reversal Provisional
• and Final.
• Exempted Services amended from 01.04.11.
• Protection for exports, etc.
• Easy option for Banks and Insurance.

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VARIOUS CONDITIONS

• Eligible Duties.
• Manner of utilisation.
• 50 credit for Capital Goods.
• As such removal.
• Removal of used capital goods.
• SAD credit.
• Write off and amendments from 01.03.11.
• Depreciation Vs Cenvat credit.
• Refund of credit for Exports.
• Documents.
• Service tax credit after payment.
• Credit for Outward Freight the story.
• Supplementary Invoice Excise / Service tax.

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VARIOUS CONDITIONS

• Job work 180 days exceptions.
• Capital goods ownership not relevant.
• First Stage Dealer / Second Stage Dealer.
• Interest Ind Swift Laboratories.

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COURTS ON CENVAT CREDIT

• Plastic crates
• Banco Products- 2009 (235) ELT 636 LB.
• Input Services
• Coca Cola 2009 (242) ELT 168 Bom.
• Ultratech 2010 (260) ELT 369 Bom.
• Structural items.
• Vandana Global 2010 (253) ELT 440 Tri LB.

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Thank you
mail_at_swamyassociates.com