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Banking related general awareness - CENVAT

Ref. Qn.No.46 of Economics -3 Cenvat is related to Excise Duty

The Modvat Scheme has been replaced by a new set of rules called CENVAT Credit Rules 2002.

The definition of Capital Goods, Exempted Goods, Final products and the inputs has been provided in Rule 2 of CENVAT Credit Rules, 2002. It also included the list of items eligible for Capital Goods as well as for the inputs.

A manufacturer or producer of final product is allowed to take CENVAT credit of duties specified in the Cenvat Credit Rules , 2002.

The Cenvat Credit in respect of inputs may be taken immediately on receipt of the inputs.
The Cenvat credit in respect of Capital Goods received in a factory at any point of time in a given financial year shall be taken only for an amount not exceeding fifty percent of the duty paid on such capital goods in the same financial year and the balance of Cenvat Credit may be taken in any subsequent financial year.
The Cenvat credit shall be allowed even if any inputs or capital goods as such or after being partially processed are sent to a job worker for further processing, testing, repair etc. and it is established from the records that the goods are received back in the factory within180 days of their being sent to a job worker.
Where any inputs are used in the final products which are cleared for export, the Cenvat Credit in respect of the inputs so used shall be allowed to be utilised towards payment of duty on any final product cleared for home consumption and where for any reason such adjustment is not possible, the manufacture shall be allowed refund of such amount.
No Cenvat credit shall be allowed on any input or capital goods which is used in the manufacture of exempted goods. This provisions shall not be applicable in case the exempted goods are either;

Cleared to a unit in a free Trade Zone.
Cleared to a 100% E.O.U.
Cleared to a unit in an Electronic Hardware Technology Parks or Soft ware Technology Park.
Supplied to the UN or an International Organisation for their official use or supplied to projects funded by them.
Cleared for export under bond.
Various documents have been prescribed on the basis of which a manufacturer can avail the Cenvat Credit.
The Manufacturer shall take all reasonable steps to ensure that the inputs or Capital goods in respect of which he has taken the Cenvat Credit are goods on which the appropriate duty has been paid.
The Cenvat credit in respect of inputs or Capital Goods purchased from a first stage or second stage dealer shall be allowed only if such dealer has maintained records indicating the fact that the inputs or capital goods were supplied from the stock on which duty was paid by the producer of such inputs or capital goods and only an amount of such duty on pro-rata basis has been indicated in the invoice issued by him.
The manufacturer of final products shall maintain proper records for the receipt, disposal, consumption and inventory of the inputs and capital goods and the burden of proof regarding the admissibility of the Cenvat Credit shall lie upon the manufacturer taking such credit.
Shifting, Sale, Merger, Amalgation etc.of Unit
If a manufacturer shifts his factory to another site or the unit is transferred on account of change in ownership, sale, merger, amalgamation etc., the manufacturer shall be allowed to transfer the Cenvat credit lying unutilised to the accounts of such transferred factory.

Any amount of credit earned by a manufacturer under the CENVAT Credit Rules. 2001 as they excisted prior to the 1st day of March, 2002 and remaining unutilised on that day is allowable as Cenvat credit and be allowed to be utilised.
A manufacturer who opts for exemption under a notification based on the value of clearances in a financial year and who has been availing of the credit of the duty paid on inputs before such option is exercised, shall be required to pay an amount equivalent to the credit in respect of the inputs lying in stock or used in any finished goods lying in stock on the date when such option is exercised.
There is a provision under rule 12 for the recovery of credit wrongly taken by an assessee along-with the interest.

A manufacturer shall be allowed to take credit of duty specified in the second schedule in relation to the specific goods only received on or after 01.03.2002
Special provisions are made for disposal of the inputs manufactured in the factories located in specified areas of NE region.


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