Dated: 5/5/2000

F.No. B-4/5/2000-Cx

Subject: Changes in CENVAT Rules…reg.

I am directed to say that certain changes have been made in relation to the CENVAT rules. These are contained in notification 37/2000-Central Excise( N.T). dated 3rd May, 2000. Copy of the notification is being sent separately. However, this can be downloaded from the web site of the Ministry of Finance. The changes made are highlighted below.

1. CENVAT credit in respect of SED paid on goods falling under sub heading Nos. 2404. 40 and 2404.50 has been allowed. Further, such credit can be taken by an assessee in respect of these inputs received in his factory on or after the 1st of March, 2000.

2. Provision has been made to allow assesses to take credit of the amounts debited by them when sending inputs to a job worker in accordance with the provisions of the erstwhile rule 57F (4), and where such inputs have been received back in the factory on or after the 1st of April, 2000.

3. In terms of the provisions of rule 57ACK, an assessee can avail credit in respect of duty paid on capital goods to the extent of 50 per cent of such duty in the financial year in which he receives the capital goods. The balance credit may be taken in a subsequent financial year subject to the capital goods still being in the use and possession of the assessee. It had been represented that this condition could not be satisfied in respect of certain capital gods like components, spares and accessories, grinding wheels, refractory materials. These representations have been considered and rule 57AC has been amended to allow credit in respect of the balance 50 per cent of the duty in respect of these capital goods (namely, components, spares and accessories, refractories and refractory materials and goods falling under heading 68.02 and sub-heading 6801.10) in a subsequent financial year without the condition of these goods being in the use and possession of the assessee in the subsequent year. The effect of this amendment would be that the assessee would avail credit of 50 per cent of the duty paid on components, spares and accessories, refractories and refractory materials and goods falling under heading 68.02 and sub-heading 6801.10 in the financial year in which he receives these goods in his factory; the balance 50 per cent credit may be availed by him in a subsequent financial year even if these goods have been used by him, and are no longer available in such subsequent financial year. It would be pertinent to mention that if he components, spare and accessories, refractories and refractory materials and goods falling under heading 68.02 and sub-heading 6801.10 have been removed by the assessee from his factory without being used, then the provisions of clause (b) of sub-rule (1) of rule 57 AB would apply , and the assessee would be required to pay duty on them accordingly. In such cases no credit would be admissible in respect of the balance 50 per cent in the subsequent financial years. This is subject to the condition that such goods are not sold without use or after use before taking the second installment of 50 per cent credit.

Illustration 1:– An assessee receives certain components in his factory on the 2nd of June, 2000. The duty paid on these is Rs. 10000. The assessee can take credit of Rs. 5000 on 2nd June, 2000 itself. He then uses these components in his factory, and these get completely used up by 1st December, 2000. The assessee will still be allowed to take credit of the balance Rs. 5000 on or after 1st April, 2001.

Illustration-2:- An assessee receives certain components in his factory on the 2nd of June, 2000. The duty paid on these is Rs. 10000. The assessee can take credit of Rs. 5000 on 2nd June, 2000 itself. He does not, however, use these components, and he removes them from his factory on 17th September, 2000. The assessee will be required to pay duty due on these components when he clears them on 17thSeptember. He will also not be allowed to take credit of the balance Rs. 5000 because these goods have been removed from his factory.

1. Attention is also invited to notification 36/2000-CE (NT) dated 28th April, 2000. The form. The form of the monthly return required to be submitted by assesses in terms of the provisions of rule57AE has been prescribed by assesses in terms of the provisions of rule 57Ae has been prescribed by this notification. It may be noted that this is a simple format which has been devised keeping in view the requirement of capturing the information on the computer system of the department, so that the same could be used to exercise meaningful control over the utilization CENVAT credit. It is envisaged that in due course this monthly return may be merged with the RT-12 or any other monthly return required to be filed by the assesses.

1. The procedure for claiming refund of credit in respect of goods which have been exported has been issued in terms of the new rule 57AC vide notification 35/2000-Central Excise (N.T.) dated 28th April, 2000. The procedure is otherwise the same as earlier contained in notification 85/87-CE(N>T) dated 1st March, 1987 issued under the erstwhile rule 57F.

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