Rishi Chanan, Advocate
Problem: Every manufacturer while crossing the threshold limit of SSI Exemption of Rs. 1.5 Crores home sales under Central Excise Law, suddenly start thinking about cenvat credit to be taken on capital goods purchased in current year or in last years. The department is always of the pro-revenue view and Range offices do not allow the cenvat credit on capital goods while availing the benefit of Notification No. 8/2003 CE on last years purchases as not registered and as well clearing exempted products. Even, also they insist reversal on 31st March, of current year purchases of capital goods, if sale does not cross Rs. 4 Crores.
Solution: It is advised that manufacturer who is going to cross SSI limit, should get registered himself under Central Excise before crossing SSI Limit or when going to purchase capital goods in the current year to save capital goods credit and start filing nil returns with sale figures only.
As regards of reversal on opt out, if manufacturer whishes to get the benefit of Notification No. 8/2003 CE or sale does not cross Rs. 4 Crores. It is advised that Rule 11(2) of Cenvat Credit Rules, 2004 only requires the reversal of inputs lying in stock or in process or contained in final product. The Rule 11(2) does not have word “CAPITAL”. Hence, cenvat credit taken on capital goods purchased in current year shall be available for deferment to be used in next financial year.
As regards , Capital Goods purchased in last year or last to last year while availing benefit of SSI exemption, if the manufacturer willing to take credit on that capital goods. The manufacturer can take credit of the Central Excise Duty paid as whole as per the view of Hon’ble CESTAT, New Delhi in the case of J.R. HERBAL CARE INDIA LTD. Versus COMMISSIONER OF C. EX., NOIDA 2010 (253) E.L.T. 321 (Tri. – Del.) also C.B.E. & C. Circular No. 345/2/2000-TRU, dated 29-8-2000 refers, if the capital goods are available, when manufacturer start paying duty. But with due regards to the above decision of Hon’ble CESTAT, it is suggested that manufacturer should only take credit on capital goods at depreciated value on pro-rata basis of capital goods available at the time of start paying duty.
Conclusion: At last, it should also be keep in mind that these facts are always attracts show cause notices on the issue of cenvat credit on capital goods wrongly availed.
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