Dated : 3-4-2000
Subject: CENVAT Rules- Clarification-Regarding
1. As you are aware, CENVAT Rules were notified vide notification No. 11/2000-CE(NT) dated 1st March, 2000 and they were to come into force from 1.4.2000. Since then, we have received references from the Commissioners as also from trade and industry, seeking clarification on certain aspects.
2. We have examined these references. Some modifications have now been carried out in the CENVAT rules and the CENVAT rules have now been notified vide notification No. 27/2000-CE(NT) dated 31st March, 2000. These come into force w. e.f 1st April, 2000.
3. The definition of ” has been revised. The revised definition is comprehensive enough to specifically include components, spares and accessories as also other capital goods like moulds and dies, refractories and refractory materials etc. It may be clarified that the components, spares and accessories may fall under any Chapter but they should be components, spares and accessories of the goods specified in clause (a)(I) of rule 57AA.
4. It may also be clarified that even air-conditioners and refrigerating equipment and computers would be eligible to CENVAT credit as capital goods. The only condition is that the manufacturers should use them in the manufacture of final product. Clearly, therefore, such of the goods which are used in the offices of the factory are not eligible to CENVAT credit. For example, an air-conditioner used in the office premises or a computer used in the office premises of the factory shall not be eligible to CENVAT credit.
5. Some doubts have been raised whether CENVAT credit would be admissible on the part of the input that is contained in any waste, refuse or bye product. In this context it is clarified that CENVAT credit shall be admissible in respect of the amount of inputs contained in any of the aforesaid waste, refuse or bye product. Similarly, CENVAT should not be denied if the inputs are used in any intermediate of the final product even if such intermediate is exempt from payment of duty. The basic idea is that CENVAT credit is admissible so long as the inputs are used in or in relation to the manufacture of final products, and whether directly or indirectly.
6. A specific provision has now been made if the inputs or capital goods are cleared to a job worker. It has been provided that they should be received back within 180 days. If they are not received, the manufacturer shall debit the CENVAT credit attributable to such inputs or capital goods, otherwise it will be an offence. However, the manufacturer shall be entitled to take CENVAT credit as and when the goods sent to the job worker are received back. If part of the goods are received back within 180 days and the rest of the goods are received back after 180 days, the obligation for debiting the credit shall arise only in respect of CENVAT credit attributable to that part which is not received within 180 days.
7. Provision has also been made for permitting the CENVAT credit when the inputs or capital goods are purchased from the first stage dealer or from the second stage dealer. These dealers should be registered under rule 52AA of the Central Excise Rules. The other procedural requirements in respect of first stage dealer and second stage dealer will continue as in the case of modvat rules.
8. In the case of capital goods, the CENVAT rules do not provide installation of capital goods as a pre-requisite for taking CENVAT credit. The credit can be taken as and when the capital goods are received in the factory. For such capital goods which were received prior to 1.4.2000 but not installed up to 1.4.2000 also, the CENVAT credit wold also be admissible. It may, however, be noted that in respect of all capital goods whether received on or after 1.4.2000 or those that were received prior to 1.4.2000 but not yet installed, the condition that CENVAT credit only up to 50% of the total admissible amount would be available in the financial year 2000-2001 would apply. The balance of the CENVAT credit in respect of such capital goods can be taken in a financial year subsequent to 2000-2001.
9. CENVAT credit shall also be admissible in respect of additional excise duty payable under the Additional Duties of Excise (Textile and Textile Articles) Act, 1978 and the additional duty of excise payable under the Additional Duties of Excise (Goods of Special Importance) Act, 1957. The credit of equivalent “CVD component” on imports shall also be admissible. However, such credit can be used only for payment of the respective kind of additional duty on the final product.
10. Provision has also been made for dealing with credit in relation to inputs used in the manufacture of final products which are exported. These provisions are on the same lines as in the case of modvat rules.
11. In the CENVAT scheme, the documents on which CENVAT credit can be taken have been prescribed to enable verification, where needed by the department. The admissibility of the amount of CENVAT credit should be discernible from the records of the manufacturer, including the payment made to the sellers of inputs and capital goods were purchased and were used by him for the intended purpose.
2. You are requested to kindly impress upon the officers to go through the CENVAT rules and apply them in the spirit the CENVAT scheme has been announced by the Finance Minister. Provisions like filing of declaration of inputs and capital goods have been dispensed by way of simplification. The intention and the expectation is that CENVAT rules would reduce the area of disputes and litigation. You are requested to kindly keep this aspect in mind and impress upon this policy objective to field officers. In case of any doubt, the matter should be resolved at your level rather than taking recourse to any hurried issue of show cause notice. In case you feel that any instructions or clarification is needed from the Board’s office to resolve any doubt or conflict, you may kindly refer the matter, so that the Board can issue the necessary instructions for the sake of ensuring uniformity in their application.
12. As regards the monthly returns, separate instructions would follow soon.