SALIENT FEATURES

1. CENVAT Credit Rules, 2004

CENVAT Credit Rules, 2004 (CCR 2004) have been notified vide Notification No. 23/2004-Central Excise (NT) dt. 10-9-2004. The same is in supersession of CENVAT Credit Rules, 2002 (CCR 02) and Service Tax Credit Rules, 2002 (STCR). CCR 04 applies to the whole of India. However, it would not apply, to the extent it relates to availment and utilisation of credit to the State of Jammu & Kashmir.

2. Eligible Beneficiaries

1. A Manufacturer or Producer of Final Products (i.e., excisable goods manufactured or produced from input or using input service) [MFP]
2. A Provider of Output Service [OSP]
3. “Output Service” means any service provided by an OSP located in taxable territory but shall not include a service:
   • Specified in Negative List [Section 66D of the Finance Act, 1994 (“Act”)]
   • Where the whole of Service tax is liable to be paid by service recipient

3. Eligible Capital Goods [‘CG’]

a) The following specific goods:

1. All goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading 6805, grinding wheels and the like, and parts thereof falling under heading 6804 of the First Schedule to the Excise Tariff Act. (CETA)
2. Pollution control equipment.
3. Components, spares and accessories of the goods specified at (i) and(ii).
4. Moulds and dies, jigs and fixtures.
5. Refractories and refractory materials.
6. Tubes and pipes and fittings thereof;
7. Storage tank and
8. Motor vehicles (other than those falling under CETA Headings 8702, 8703, 8704, 8711 and their chassis but including dumpers and tippers

Used :

• In the factory of the MFP, but does not include any equipment or appliance used in an office;
• Outside the factory of MFP for generation of electricity for captive use within the factory; or
• For providing OS;

b) Motor Vehicles (MV) designed for transportation of goods registered in the name of ‘OSP’ for providing the following services:

• Courier Agency
• Renting of such MV
• Transportation of inputs and CG for providing OS

c) MV designed to carry passengers including their chassis, registered in the name of OS when used for providing the following services:

• Transportation of Passengers
• Renting of such MV
• Imparting motor driving skills

d) Components, Spares and Accessories of MV which are CG

4. Eligible Inputs

a) The amended definition of “inputs”, includes the following :

1. All goods used in the factory by the MFP or
2. Any goods including accessories, cleared along with the final product, the value of which is included in the value of the final product and goods used for providing free warranty for final products or
3. All goods used for generation of electricity or steam for captive use; or
4. All goods used for providing any output service

b) The amended definition of “inputs”, wef 1/4/2011, excludes the following:

1. Light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol;
2. Any goods used for :
   • Construction or execution of works contract of a building or a civil structure or a part thereof; or
   • Laying of foundation or making of structures for support of capital goods except for the provision of service portion in execution of Works Contract or Construction Services as defined in Section 66E(b) of the Act.
3. Capital goods except when used as parts or components in the manufacture of a final product;
4. Motor vehicles;
5. Any goods, such as food items, goods used in a guest house, residential colony, club or a recreation facility and clinical establishment, when such goods are used primarily for personal use or consumption of any employee; and
6. Any goods which have no relationship whatsoever with the manufacture of a final product.

5. Eligible “Input Services”

a) The amended definition of “input services”, includes the following:

1. Any Service used by OSP for providing an output service; or
2. Any Service used by MFP, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal and includes:
   • Services used in relation to modernisation, renovation or repairs of a factory, premises of OSP or an office relating to such factory or premises
   • Advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation up to the place of removal

b) The amended definition of “input services, excludes the following:

1. Services portion in execution of Works Contract or Construction Services as defined in Section 66E(b) of the Act. [Specified Services] insofar as they are used for:
   • Construction or execution of Works Contract of a building or a civil structure or a part thereof; or
   • Laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services as stated above or
2. Services of renting of MV would be excluded in so far as they relate to a MV which is not CG or
3. Services of general insurance business, servicing, repair and maintenance, in sofar as they relate to MV which is not CG except in the cases when used by a :
   • MFP of a MV in respect of MV manufactured by him or
   • An insurance company in respect of MV insured or reinsured by such person or.
4. Services which are provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as leave or home travel concession, when such services are used primarily for personal use or consumption of any employee.

6. Specified Duties & Taxes (SDT) Eligible for Credit

a) A List of duties & taxes eligible for availment of Credit are specified in Rule 3(1) of CCR 04, which includes in particular, the following:

• The duty of excise specified in the First Schedule to CETA leviable under the Central Excise Act, 1944 [CEA]. [excepting duty paid on goods on which exemption under Notification No.1/2001 – CE dt 1/3/2011 (as amended) is availed]
• The duty of excise specified in the Second Schedule to CETA leviable under CEA.
• Additional duty leviable under section 3 of Customs Tariff Act equivalent to the specified duty of excise [CVD].
  [Credit shall not be allowed in excess of 85% of addl. duty of Customs on ships, boats & floating structures for breaking up.]
• Additional duty leviable under section 3(5) of Customs Tariff Act [MFP is eligible to avail Credit of such duty. However OSP cannot avail credit of such Duty].
• Service tax leviable under Section 66B of the Act on taxable services
• The Education Cess (EC) on excisable goods/taxable services
• Secondary and Higher Education Cess (SHEC) on excisable goods/taxable services.

Paid on

• Any input or CG received in the factory of MFP or by OSP on or after the 10-9-2004; and
• Any input service received by the MFP or by OSP on or after the 10-9-2004.

b) CENVAT credit can be taken, equal to Central Excise duty paid on CG, at the time of debonding of a Unit.

7. Restrictions on Credit Availment

1. CENVAT credit shall not be allowed on such quantity of inputs or input services which is used in the manufacture of exempted goods or exempted services except in the manner specified. [Refer para 11 hereafter].
2. No CENVAT credit shall be allowed on CG which are used exclusively in the manufacture of exempted goods or in providing exempted services, other than the FP which are exempt under SSI Exemption Scheme.
3. CENVAT credit on CG shall not be allowed in respect of that part of value of CG which represents the amount of duties paid on such CG which the manufacturer or OSP claims as Depreciation u/s. 32 of Income-tax Act, 1961.
4. In cases where, under a Notification No. 26/2012 – ST dt. 20/6/2012 abatements have been claimed by specified OSP, CENVAT credit of duties paid on inputs /capital goods or Service Tax paid on Input Services can be availed only as specified in the said Notification
5. In cases where an OSP opts for Valuation of taxable services in terms of Rules 2A & 2C of Service Tax (Determination of Value) Rules, 2006, the CENVAT Credit of duties or cess paid on inputs as specified in the said Rules, cannot be taken.

8. Availment of Credit

a) CENVAT credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of OSP.

An amendment has been made wef 17/3/2012 to provide that CENVAT Credit can be taken by a OSP if the inputs / CG are delivered to such OSP subject to maintenance of documentary evidence of delivery and location of inputs / CG.

However, wef 1/9/2014 it was provided that, a MFP or OSP shall not take CENVAT Credit in regard to inputs, after 6 months of the date of the issue of any of the documents specified in Rule 9(1) of CCR 04. The said time limit of 6 months is increased to 1 year wef 1/3/2015.

b) The CENVAT credit in respect of CG received in a factory or in the premises of the OSP at any point of time in a given financial year shall be taken only for an amount not exceeding fifty per cent of the duty paid on such CG in the same financial year. [However, CENVAT credit in respect of CG shall be allowed for the whole amount of the duty paid on such CG in the same financial year if such CG are cleared as such in the same financial year.]

The balance of CENVAT credit may be taken in any financial year subsequent to the financial year in which the CG were received in the factory of the manufacturer, or in the premises of OSP, if the CG are in the possession on the MFP or OSP in such subsequent year.

c) W.e.f. 1-4-2010, it has been provided that, SSI units can avail 100% CENVAT Credit on Capital goods in the year of receipt. [SSI unit shall be eligible if aggregate value of clearances of all excisable goods for home consumption in the preceding financial year computed in a prescribed manner does not exceed ₹ 400 lakhs]

d) The CENVAT credit in respect of the CG shall be allowed to a MFP / OSP even if such CG are acquired by him on lease, hire purchase or loan agreement, from a financial company.

e) Wef 1/3/2015, an amendment is made to provide that CENVAT Credit can also be taken upon receipt of inputs and capital goods in the premises of a job worker, in cases where goods are sent directly to the job worker on the directions of MFP or OSP.

f) Rule 4(7) of CCR 04 provides that CENVAT Credit on input services shall be available on receipt of invoice, Bill or, as the case may be, challan referred to in Rule 9 raised on or after 1/4/2011 (except in cases of reverse charge) as long as the payment is made within three months from the date of the invoice. However, if the payment is not made within 3 months the same would have to be reversed and will be re-available as credit whenever payments are being made.

Wef 1/9/2014 it was provided that, a MFP or OSP shall not take CENVAT Credit in regard to input services, after 6 months of the issue of any of the documents specified in Rule 9(1) of CCR 04. The said time limit of 6 months is increased to 1 year wef 1/3/2015.

In case of an “input service” where the Service tax is paid under reverse charge by the recipient of the service, the CENVAT credit shall be available only when payment is made of the value of input service. Wef 11/7/2014, it was provided that, in respect of input services where the whole of the service tax is liable to be paid by the receipient of service, Credit shall be allowed after Service tax is paid. However, wef 1/4/2015 it is now provided that, in cases of input service where whole or part of the Service tax is liable to be paid by the recipient of service, CENVAT Credit shall be allowed after such Service tax is paid

g) Rule 4(7) provides that, CENVAT Credit in respect of an Invoice, Bill or Challan referred in Rule 9 of CCR 04 which is issued before 1/4/2011, shall be allowed on the day on which payment is made of the value of input service & Service tax.

9. Utilisation of Credit & Related

a) The CENVAT credit may be utilized for payment of :

1. Any duty of excise on any FP; or
2. An amount equal to CENVAT credit taken on inputs if such inputs are removed as such or after being partially processed; or
3. An amount equal to the CENVAT credit taken on CG if such CG are removed as such; or
4. An amount under sub-rule (2) of rule 16 of Central Excise Rules, 2002 (CER); or
5. Service tax on any OS.

CENVAT Credit cannot be utilised for payment of duty on goods in respect of which exemption under Notification No. 1/11 – CE dt. 1/3/2011 as amended) is availed.

Further, wef 1/7/2012, CENVAT Credit cannot be used for payment of Service tax in respect of services where the person liable to pay tax is the service recipient.

b) i) When inputs or CG on which CENVAT credit has been taken, are removed as such from the factory, or premises of OSP, the MFP or OSP, shall pay an amount equal to the credit availed in respect of such inputs or CG and such removal shall be made under the cover of an invoice.

However, such payments shall not be required to be made where any inputs / CG are removed outside the premises of the OSP for providing the OS.

ii) An amendment is made wef 17/3/2012 to substitute the above provisions and new Rule 3(5A) is inserted to provide that, in cases where CG on which CENVAT Credit has been taken are removed after use, the MFP / OSP shall pay as under :

• In case of such goods (other than computers & computer peripherals) an amount equal to CENVAT Credit less 2.5% for each quarter of a year or part thereof from the date of taking of Credit.
• In case of such goods (viz computer & computer peripherals), a higher depreciation has been prescribed.

However, if the amount so calculated is less than the amount equal to the duty leviable on transaction value, the amount to be paid shall be equal to the duty payable on transaction value.

If the CG are cleared as waste and scrap, the MFP shall pay an amount equal to the duty leviable on transaction value

iii) If the Value of inputs or CG (before put to use) on which CENVAT Credit has been taken is fully or partially written off (or such provision is made) in the books of account, the MFP or OSP shall pay an amount equal to CENVAT Credit in respect of said inputs/CG.

iv) Wef 1/3/2013, an explanation has been inserted to provide that, if the MFP or OSP fails to pay the amount payable under Sub-rules (5), (5A), (5B) and (5C) of Rule 3 of CCR 04, it shall be recovered in the manner provided in Rule 14 of CCR 04 for recovery of CENVAT Credit wrongly taken.

c) Credit of EC on excisable goods/taxable services and the SHEC on excisable goods/taxable services can be utilised, either for payment of EC on excisable goods/SHEC on excisable goods or for payment of EC/SHEC on taxable services.

d) The Finance Bill, 2005 has increased the general rate of basic excise duty from 12% to 12.5% (wef 1/3/2015) inclusive of EC & SHEC. Further wef 30/4/2015, it has been provided that, the following can be utilised for payment of basic excise duty on or after 30/4/2015:

1. EC & SHEC paid on inputs/input services received on or after 1/3/2015
2. EC & SHEC paid. on CG received on or after 1/3/2015
3. 50% of EC & SHEC paid on CG received during 1/4/2014 to 31/3/2015.

Subject to the above, unutilsed balance of EC & SHEC on inputs, input services and CG as on 28/2/15 cannot be utilized by MFP for payment of basic excise duty.

10. Refund of CENVAT Credit

a) Rule 5 which provided for grant of refund to MFP / OSP in case of exports has been substituted by a new Rule, wef 1/4/2012, whereby a Simplified Scheme of refund has been introduced. As a welcome measure, the amended rule does not require correlation between input services vis-a -vis exported goods / services. Broadly the duties or taxes paid on any goods or services that qualify as inputs / input services will be entitled to refund in the proportion of export turnover to the total turnover.

Detailed Notification prescribing the procedure & methodology for claiming refund has been issued.

b) A new Rule 5B has been introduced, wef 1/7/2012, to provide for refund of CENVAT Credit to an OSP providing Services taxed on a reverse charge basis and is unable to utilise the CENVAT Credit availed on inputs and input services for payment of service tax on such output services.

Detailed Notification prescribing procedure & methodology for claiming refund has been issued.

c) A new Explanation (1A), has been inserted wef 1/3/2015, defining “export goods” to mean any goods which are to be taken out of India to a place outside India.

11. Obligations of MFP and OSP

11.1 Rule 6(1) has been amended, wef 1-4-2011 to provide that CENVAT Credit shall not be allowed on “inputs used in or in relation to the manufacture of exempted goods or for provision of exempted services” or “input services” used in or in relation to the manufacture of exempted goods and their clearance up to the place of removal or for provision of exempted services

An Explanation 1 has been inserted wef 1/3/2015 to provide that, exempted goods or final products as defined in Rules 2(d) & (h) of CCR 04, shall include non-excisable goods cleared for a consideration from the factory.

11.2 Rule 6(2) has been substituted, wef 1-4-2011 to provide that, where a MFP or OSP avails CENVAT Credit in respect of any inputs or input services and manufacturers such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, the MFP/ OSP shall maintain separate accounts for the following :

a) Receipt, consumption and inventory of inputs used :

1. In or in relation to the manufacture of exempted goods;
2. In or in relation to the manufacture of dutiable final products excluding exempted goods;
3. For the provision of exempted services;
4. For the provision of output services excluding exempted services;

b) receipt and use of input services :

1. In or in relation to the manufacture of exempted goods and their clearance up to the place of removal;
2. In or in relation to the manufacture of dutiable final products, excluding exempted goods, and their clearance up to the place of removal;
3. For the provision of exempted services; and
4. For the provision of output services excluding exempted services, shall take CENVAT credit only on inputs stated in a (ii) & (iv) above and input services stated in b (ii) & (iv) above

11.3 Rule 6(3) has been substituted, wef 1/4/2011, specifying the following options to a MFP / OSP:

1. Payment of an amount equal to six per cent of value of the exempted goods and exempted services; or [in case of transportation of goods or passengers by rail the amount required to be paid shall be an amount equal to 2% of the value of exempted Services]
2. Payment of an amount as determined under Rule 6(3A) or
3. Maintenance of separate accounts for the receipt, consumption and inventory of inputs and take CENVAT credit only on inputs stated in Paras 11.2 (a)(ii) & (iv) above and pay an amount as determined under Rule 6(3A) in respect of input services.

11.4 The following has also been provided in substituted Rules 6(3)/6(3A) wef 1-4-2011:

1. If any part of the value of a taxable service has been exempted on the condition that no CENVAT Credit of inputs and input services, used for providing such taxable service, shall be taken then the amount stated in 11.3(a) above shall be six per cent of the value so exempted.
2. Credit shall not be allowed on inputs used exclusively in or in relation to the manufacture of exempted goods or for provision of exempted services and on input services used exclusively in or in relation to the manufacture of exempted goods and their clearance up to the place of removal or for provision of exempted services.
3. No CENVAT Credit shall be taken on the duty or tax paid on any goods and services that are not inputs or input services.
4. Payment of an amount under Rule 6(3) shall be deemed to be CENVAT credit not taken for the purpose of an exemption notification wherein any exemption is granted on the condition that no CENVAT credit of inputs and input services shall be taken.

11.5 Rule 6(3B) has been inserted, wef 1-4-2011 to provide that, notwithstanding anything contained in Rules 6(1), (2) and (3), a banking company and a financial institution including a non-banking financial company, engaged in providing service by way of extending deposits, loans or advances shall pay every month an amount equal to fifty per cent of the CENVAT credit availed on inputs and input services in that month.

11.6 Rule 6(3C) inserted wef 1-4-2011 to provided that, notwithstanding anything contained in Rules 6(1), (2), (3) and (3B) a Service Provider providing the specified taxable services [viz. Life Insurance and ULIP] shall pay every month an amount equal to twenty per cent of the CENVAT credit availed on inputs and input services in that month. This Sub-rule has been deleted wef 1/4/2012.

11.7 An Explanation has been inserted, wef 1-4-2011, to the effect that “Value” for the purpose of Rules 6(3) & (3A) shall :

1. have the same meaning as assigned to it under section 67 of the Act, read with rules thereunder or, as the case may be, the value determined under Sections 3, 4 or 4A of CEA read with rules thereunder.
2. in the case of a taxable service, when the option available under sub-rules (7), (7B) or (7C) of rule 6 of the Service Tax Rules, 1994, has been availed, shall be the value on which the rate of Service tax under section 66B of the Act, read with an exemption notification, if any, relating to such rate, when applied for calculation of service tax results in the same amount of tax as calculated under the option availed.
3. in the case of trading, “Value” for the purpose of Rules 6(3) and 6(3A) shall be the difference between the sale price and the cost of goods sold (determined as per the generally accepted accounting principles without including the expenses incurred towards their purchase) or ten per cent of the cost of goods sold, whichever is more.
4. In case of trading of securities, shall be the difference between the sale price and purchase price of the securities traded or 1% of the purchase price of the securities traded, whichever is more.
5. Shall not include the value of extending deposits, loans or address in so far as consideration is represented by way of interest or discount.

11.8 The procedure prescribed under Rule 6(3A) of CCR 04 requires the MFP/OSP to comply with following:

1. Intimate in writing to the Superintendent of Central Excise, giving the specified particulars;
2. Determine and pay provisionally every month, an amount equivalent to CENVAT Credit attributable to manufacture of exempted goods/provision of exempted services in accordance with the formula prescribed in Rule 6(3A)(b) of CCR 04;
3. Determine finally, the amount of CENVAT Credit attributable to exempted goods/exempted services for the whole financial year, in accordance with the formula prescribed in Rule 6(3A)(c) of CCR 04;
4. Determine shortfall/surplus in payment of CENVAT Credit;
5. Pay the shortfall by 30th June. In case of delay, interest would be payable at the rate of 24% per annum;
6. Adjust the excess amount on their own by taking credit of such amount; and
7. Intimate in either case to the jurisdictional Superintendent of Central Excise, within 15 days from the date of payment/date of adjustment giving the specified particulars.

11.9 The aforesaid provisions shall not be applicable in case excisable goods removed without payment of duty are cleared to units in SEZ (or to a developer of a SEZ), 100% EOU, EHTP, STP, specified international projects, for Export under Bond, supply to mega power projects under specified circumstances etc.

11.10 A retrospective amendment is made in Rule 6 w.e.f. 10-9-2004, for resolvement of disputes, in cases where a dispute relating to adjustment of credit on inputs used in or in relation to exempted final products for the period from 10-9-2004 to 31-3-2008 is pending as on the date of the enactment of Finance Bill, 2010. A manufacturer availing CENVAT Credit in respect of any inputs or input services and manufacturing final products which are dutiable as well as exempted and desirous of resolving pending dispute can pay an amount equivalent to CENVAT Credit attributable to the inputs or input services used in or in relation to the manufacture of exempted goods before or after the clearance of such goods along with interest at the rate of 24% p.a. from the due date till the date of payment.

11.11 Rule 6(7) has been inserted, wef 1/7/2012 to provide that, the provisions of Rules 6(1), (2), (3) and (4) shall not be applicable in case the taxable services are provided without payment of service tax, to a Unit in a SEZ or to Developer of a SEZ for their authorised operations. Vide Clause 144 of the Finance Act, 2012, the aforesaid amendment has been made retrospective (wef 10/2/2006)

11.12 W.e.f. 1/7/2012, it has been specified in Rule 6(7) that Rules 6(1) to (4) shall not apply to exported services. Further, in Rule 6(8) it has been specified that, exported service which satisfies the conditions under Rule 6A of ST Rules shall not be an exempted service. Wef 11/7/2014, it has been provided that, if payments are received after the specified or extended period allowed by RBI but within one year from such extended period, the OSP shall be entitled to take Credit of an amount equivalent to the CENVAT Credit paid earlier to the extent it relates to such payment, on the basis of documentary evidences of the payments received

12. Distribution of Credits by Input Service Distributor (ISD)

a) ISD has been defined to mean an office of MFP or OSP which receives invoice issued under Rule 4A of Service Tax Rules, 1994 (STR) towards purchase of input services and issues invoice, bill or challan for distributing the credit of service tax paid on said services to such MFP or OSP.

b) W.e.f. 16-6-2005, ISD is required to be registered, with Service Tax Dept.

c) Rule 7 has been substituted wef 1/4/2012, (as amended) to provide that ISD can now distribute CENVAT Credit in respect of Service tax paid to its manufacturing / Service providing Units subject to the following conditions.

1. Credit distributed against a tax paid document referred to in Rule 9 should not exceed the amount of service tax paid;
2. Credits of Service tax attributable to service used by one or more Units exclusively engaged in the manufacture of exempted goods / providing exempted services shall not be distributed;
3. Credits of Service tax attributable to services used wholly by a Unit shall be distributed only to that Unit; and
4. Credit of Service tax attributable to service used in more than one unit shall be distributed pro rata on the basis of the turnover of such units during the relevant period to the total turnover of all its Units which are operational in the current year, during the said relevant period.

d) The following has been clarified :

1. “Unit includes premises of OSP / MFP including factory whether registered or not.
2. “Total turnover” shall be determined in the manner specified under Rule 5
3. The “relevant period” shall be :
   • if the assessee has turnover in the “financial year” preceding to the year during which credit is to be distributed for month / quarter, the said financial year.
   • if the assessee does not have turnover for some or all the units in the preceding financial year, the last quarter for which details of turnover of all the units are available, previous to the month / quarter for which credit is to be distributed

13. Distribution of Credits on inputs / CG and SAD

1. W.e.f. 1-4-2008 a new Rule 7A is inserted, to prescribe a procedure to enable OSP to take credit on inputs and CG on the basis of invoice, bill or challan issued by its other offices or premises. Rules relating to Registered Dealer Mechanism under Central Excise shall apply mutatis mutandis to such offices or premises of the OSP.
2. A new Sub-rule 10A has been inserted whereby a mechanism is provided so as to permit, a MFP to transfer Unutilised Credit of Special Additional Duty (SAD) lying with one of his registered premises at the end of a quarter, to other registered premises of such MFP

14. Documents & Accounts

1. The CENVAT Credit shall be taken by MFP/OSP/ISD be on the basis of specified duty/tax paid documents. [Refer Rule 9(1) of CCR 04]
2. Rule 9(2) has been amended to provide for availability of credit even though any document may not contain all the particulars specified subject to a condition that Deputy Commissioner of Central Excise is satisfied that goods or services covered by the said document have been received and accounted for in the books of account of the receiver.
3. The MFP or OSP taking CENVAT Credit on input or CG or input service, or the ISD distributing CENVAT Credit on input service is required to take all reasonable steps to ensure that the input or CG or input service in respect of which he has taken the CENVAT credit are goods or services on which the appropriate duty of excise or service tax as indicated in the documents accompanying the goods or relating to input service, has been paid.
4. The CENVAT Credit in respect of input or CG purchased from a first stage dealer or second stage dealer shall be allowed only if such first stage dealer or second stage dealer, as the case may be, maintains records indicating the fact that the input or CG was supplied from the stock on which duty was paid by the producer of such input or CG and only an amount of such duty on pro rata basis has been indicated in the invoice issued by him. The said provisions shall equally apply to an importer who issues an Invoice for availment of CENVAT Credit.
5. The MFP /OSP shall maintain proper records for the receipts, disposal, consumption and inventory of the input and CG in which the relevant information regarding the value, duty paid, CENVAT credit taken and utilised, the person from whom the input or CG have been procured is recorded and the burden of proof regarding the admissibility of the CENVAT credit shall lie upon the MFP/OSP taking such credit.
6. The MFP / OSP shall maintain proper records for the receipt and consumption of the input services in which the relevant information regarding the value, tax paid, CENVAT credit taken and utilised, the person from whom the input service has been procured is recorded and the burden of proof regarding the admissibility of the CENVAT Credit shall be upon the MFP/OSP taking such credit.
7. Returns required to be filed in the prescribed form are as under:

8. W.e.f. 1-3-2007, Rule 9 has been amended, to allow an assessee to rectify mistakes and file revised return within 60 days from the due date from filing of original return.

15. Transfer of CENVAT Credit

1. If a MFP shifts his factory to another site or the factory or if a OSP shifts or transfer his business is transferred on account of change in ownership or on account of sale, merger, amalgamation, lease or transfer of the factory to joint venture with the specific provision for transfer of liabilities of such factory, then, MFP/OSP shall be allowed to transfer the CENVAT Credit lying unutilised in his accounts to such transferred, sold, merged, leased or amalgamated factory.
2. The transfer of the CENVAT credit shall be allowed only if the stock of inputs as such or in process, or the CG is also transferred along with the factory or business premises to the new site or ownership and the inputs, or CG on which credit has been availed of are duly accounted for to the satisfaction of the Central Excise Authorities.

16. Transitional Provisions

Any amount of credit earned by a MFP under CCR 02 as they existed prior to the 10-9-2004 or by a OSP under the STCR, as they existed prior to the 10-9-2004, and remaining unutilised on that day shall be allowed as CENVAT Credit to such MFP/OSP under these Rules, and shall be allowed to be utilised in accordance with CCR 04.

17. Recovery of CENVAT Credit Wrongly Taken or Erroneously Refunded

1. Wef 1/3/2015, a new sub-rule (1)(i) has been inserted in Rule 14(1) of CCR 04 to provide that, in cases where CENVAT Credit has been taken wrongly but not utilised, the same shall be recovered from the MFP or OSP and the respective provisions of Section 11A of CEA or Section 73 of the Act, shall apply.
2. A new sub-rule (2) has been inserted wef 1/3/2015 to provide that, for the purpose of Rule 14(1), all Credits taken during a month shall be deemed to have been taken on the last day of the month and the utilisation thereof shall be deemed to have occurred in the following manner:
   1. Opening balance of the month has been utilised first;
   2. Credits admissible in terms of these rules taken during the month has been utilised next;
   3. Credit inadmissible in terms of these rules taken during the month has been utilised thereafter

18. Penal Provisions

1. If any person, takes CENVAT credit in respect of input or CG/in respect of Input Services wrongly or contravenes any of the provisions of these rules in respect of any input or CG then:
   • All goods shall be liable to confiscation and
   • Such person, shall be liable to a penalty not exceeding the duty on the excisable goods in respect of which any contravention has been committed, or ₹ 2,000/-, whichever is greater.
2. In cases where the CENVAT credit in respect of input or CG/in respect of input services has been taken or utilized wrongly on account of fraud, wilful misstatement, collusion or suppression of facts, or contravention of any of the provisions of CEA & Rules framed thereunder with an intention to evade payment of duty, then, the MFP/OSP shall also be liable to pay penalty in terms of the provisions of section 11AC of CEA/Section 78 of the Act.
3. The penal provisions under Rules 15(1), (2) & (3) of CCR 04, have been aligned with provisions of sections 11AC (1) (a) & (b) of CEA and section 76(1) of the Act, effective from the date of the enactment of Finance Bill, 2015.
4. W.e.f. 1-3-2008, Rule 15A is inserted under CCR 04, to provide for a general penalty up to ₹ 5,000/- in case of contravention of any of the provisions of the Rules for which no specific penalty is provided.

19. Prosecution

Availment and utilisation of credit of taxes without actual receipt of taxable service either fully or partially in violation of CCR 04 is an offence liable to prosecution in terms of Section 89 (b) of the Act.