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LEARNING

OUTCOME
Making aware
how to Avail and Utilize
CENVAT Credit

WHAT IS AVAILMENT?
Meaning:
Recording the credit statutory
books
Results increasing the balance
Cenvat Credit
Once
Credit
taken/
availed

ELIGIBLE FOR UTILIZATION

WHAT IS UTILIZATION?
Meaning:
Using Credit availed for payment
of duty/ service tax
Results in decrease of Credit
balance.
Reversal: when credit taken wrongly

BASIC CONDITIONS (Eligibility)?


There should be:
Manufacture
provision of
taxable
output service
Goods (Inputs/ Capital) and Services: eligible
Credit available: duties/ taxes and paid
No credit final product
- Exempt/ not
taxable
Credit available specified documents only.

CENVAT CREDIT
FUND
utilized for payment of

Any DUTY on any final Product

Service tax on specified


output service

CENVAT CREDIT
Allowed to/ Applies on:
Duty/ tax/cess

Goods:
Input/ capital

Input service

Manufacturer
provider of output service

CENVAT CREDIT [Rule 3 (1)]


Allowed of:
Excise Duty of Excisable Goods
Additional Duty of Customs paid
(imported goods)
Service Tax leviable taxable services
NCCD

CENVAT CREDIT
Excise Duty:
Basic Excise Duty
Education Cess
Secondary and Higher Education Cess
Additional Duty of Customs:
U/s 3 (1): Countervailing Duty (CVD)equitable to BED
U/s 3 (5): Special CVD (counter balanceSales tax/ VAT)
Note: not available to Service Provider

CENVAT CREDIT
Service Tax:
Service Tax
Education Cess
Secondary and Higher Education Cess

Example:
M/s AJ imported some inputs
Basic Custom Duty: Rs.5,00,000
Surcharge: Rs.50,000
CVD: Rs.1,00,000 (U/s 3 (1):- 90,000)
(U/s 3 (5):- 10,000)
Calculate amount of Cenvat Credit
available, if
a) As a manufacturer
b) As a service provider

Solution:
If as a manufacturer:
Credit: CVD + Special CVD = Rs.
1,00,000
If as a service provider:
Credit: CVD (No SCVD)= Rs.90,000

Inter-changeability of Credit (Rule


3 (4))
Any duty, tax can be used for credit.
Payment of NCCD can be used
balance of EC/ SHEC = NOT VICE
VERSA.
Cess on excise tax and service tax- can
be used interchangeability.
Interchangeability can used for same
QUARTER/ MONTH of payment.

EXAMPLE 1:
Service Tax credit availed on input
services
For the period 01-07-2012 to 04-072012
Can credit be taken for the quarter
ending June 12?
EXAMPLE 2:
Can credit be used for payment of
interest/penalty and fine?

Solution 1:
No.
Credit cannot be taken for the quarter
ending June 2012, provided used for the
quarter ending 30th June 2012.
Solution 2:
No.
Credit cannot be used for payment of
interest/penalty and fine.
Reason: Used only payment of duty on final
product/ Service tax on services.

REVERSAL OF CREDIT
Credit taken as soon as inputs are
received in factory or input services paid
for.
SITUATION 1
Manufacturer manufacture both
exempted and taxable goods.
Service Provider: provides exempted and
taxable services
EITHER PAY AMOUNT OR REVERSE
PROPORTIONATE CENVAT CREDIT

EXAMPLE 1:
Excise duty paid: Inputs goods: Rs.1,000
Capital goods: Rs.5,000
Service Tax Paid: Input Services:
Rs.2,000
Excise Duty Paid: Rs.14,500
Goods manufactured: Rs.2,00,000
Out of Rs.2,00,000 (Rs.60,000
exempted Goods)
Rate of Excise Duty: 10%

Solution 1:
Cenvat Credit Utilized:
1,000 + 2,500 + 2,000 = Rs.5,500
Pay the Amount:
Manufacturer: 5% of Rs.30,000 =
Rs.1,500
OR
Reverse the Proportionate
Cenvat Credit:
60,000/ 2,00,000 * 5,500 = Rs.1,650

REVERSAL OF CREDIT
SITUATION 2
Rule 21 CE Rules: Reversal: if remission
obtained on duty payable on final product
Input Goods: are destroyed or unfit for
consumption while in store
NO reversal for Input Services and Capital
Goods

REVERSAL OF CREDIT
SITUATION 3
Rule 3 (5B): Cenvat Credit Rules: Reversal:
obsolete goods partly or wholly written of
Required to pay amount equal to Cenvat
Credit taken
If subsequently used take credit of amount
paid

NO REVERSAL OF CREDIT
SITUATION 1:
In case of export/ deemed export or supplied
- to UN Agencies or to EOU/ STP/EHTP/ SEZ.
SITUATION 2:
If duty paid on final product was actually
not payable.

Numerical No. 22.1 (Page No. 423)

Read:
who is/ are:
- First Stage dealer
- Second Stage dealer on (Page No. 409)
Duty paying documents for cenvat (Page
Nos. 406 to 408)
Responsibility of person taking cenvat
credit (Page No. 410)