Cenvat Credit Rules, 2004

SALIENT FEATURES

1. CENVAT Credit Rules, 2004

CENVAT Credit Rules, 2004 (CCR 04) 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’]

1. 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 and wagons falling under sub- heading 860692 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;
   • Outside the factory of MFP for generation of electricity or for pumping of water for captive use within the factory; or
   • for providing OS;
2. 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
3. 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
4. Components, Spares and accessories of MV which are CG

4. Eligible Inputs

1. "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
   5. All CG which have a value upto Rs. 10,000 per piece
2. "Inputs" 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”
   1. "Input services" includes the following:

   1. Services provided / agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India where service tax is paid by the manufacturer or the provider of output service being importer of goods as the person liable for paying service tax for the said taxable services and the said imported goods are his inputs or capital goods (inserted w.e.f. 23-4-2017).
   2. Any Service used by OSP for providing an output service; or
   3. 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, busine3ss exhibition, legal services, inward transportation of inputs or capital goods and outward transportation up to the place of removal

   2. "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

1. 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. 1/3/11 (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.
• Krishi Kalyan Cess

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.

2. 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 para11 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 
      20-6-12 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

1. 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.

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, w.e.f. 1-9-14 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.

2. 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.

3. SSI units can avail 100% CENVAT Credit on CG 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]
4. 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.
5. 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.
6. 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.

W.e.f. 1-9-14 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 1/3/15.

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. W.e.f. 11-7-14, it was provided that, in respect of input services where the whole of the Service tax is liable to be paid by the recipient of service, Credit shall be allowed after Service tax is paid. However, wef 1-4-15 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

7. W..e.f. 13/04/2017 In respect of services provided or agreed to be provided by a person located in non-taxable territory to a person in non-taxable territory by way of transportation of goods by a vessel from a place outside India upto the customs station of clearance in India where service tax is paid by the manufacturer or OSP, being importer of goods CENVAT credit of service tax paid by such person liable for paying service tax shall be allowed.
8. An amendment is made in Sub-Rule (7) to provide that CENVAT Credit of Service tax paid in a financial year, on the one time charges payable upfront or in installments, for the service of assignment of the right to use any natural resources by the Government, local authority or any other person shall be spread evenly over a period of 3 years.

It is also provided that where the MFP or OSP further assigns such right to use assigned to him, in any financial year, to another person against a consideration, balance CENVAT Credit not exceeding the Service tax payable on the consideration charged by him for such further assignment, shall be allowed in the same financial year. It is further provided that CENVAT Credit of annual or monthly user charges payable in respect of such assignment shall be allowed in the same financial year.

9. Utilisation of Credit & Related

1. 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 utilized for payment of duty on goods in respect of which exemption under Notification No 1/11 – CE dt. 1-3-11 as amended) is availed.

Further, w.e.f. 1-7-12, 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.

2. 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) 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) 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.

3. 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.
4. The Finance Act, 2005 increased the general rate of basic excise duty from 12% to 12.5% (wef 1/3/15) inclusive of EC & SHEC. Further wef 30/4/15, it has been provided that, the following can be utilized for payment of basic excise duty / Service tax on or after 30/4/15:

1. EC & SHEC paid on inputs / input services received by MFP/OSP on or after 1/3/15
2. EC & SHEC paid. on CG received by MFP/OSP on or after 1/3/15
3. 50% of EC & SHEC paid on CG received by MFP / OSP during 1/4/14 to 31/3/15.

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 / OSP for payment of basic excise duty Service tax.

5. A proviso is inserted after eight proviso in Sub-rule 3, to provide that, CENVAT Credit shall not be utilised for payment of Infrastructure Cess leviable under Sub-Clause(1) of Clause 159 of the Finance Act, 2016.
6. CENVAT Credit of Krishi Kalyan Cess, introduced wef 1/6/16 on input services, can be utilized against payment of Krishi Kalyan Cess by OSP.

10. Refund of CENVAT Credit

1. Rule 5 provides for grant of refund to MFP / OSP in case of exports 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.
2. Rule 5B has been introduced, wef 1/7/12, 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.
3. Explanation (1A), has been inserted wef 1/3/15, defining “export goods” to mean any goods which are to be taken out of India to a place outside India.
4. An amendment has been made wef 1/3/16 to provide that, the time limit for filing an application for refund under Rule 5 in case of exported services, shall be 1 year from the following:

• date of receipt of payment in convertible foreign exchange, where provision of service 
  has been completed prior to receipt of such payment or
• date of issue of invoice, where payment for the service has been received in advance prior to the date of issue of the invoice

11. Obligations of MFP and OSP

1. Sub-rule (1) of Rule 6 has been amended to state that as per the existing basic principle CENVAT Credit shall not be allowed on such quantity of input and input services as is used in or in relation to manufacture of exempted goods and exempted service. The Sub-rule thereafter provides that the procedure for calculation of Credit not allowed shall be as stated in sub-rules (2) and (3), for two different situations.

   Explanations 3 and 4 are being inserted in sub-rule (1) so as provide for reversal of CENVAT Credit on inputs/input services which have been commonly used in providing taxable output service and an activity which is not a “service” under the Act,.

2. Sub-rule (2) of Rule 6 has been amended to provide that a MFP who exclusively manufactures exempted goods for their clearance up to the place of removal or OSP who exclusively provides exempted services shall pay (i.e. reverse) the entire Credit and effectively not be eligible for Credit of any inputs and input services used.
3. Sub-rule (3) of Rule 6 has been amended to provide that when a MFP manufactures two classes of goods for clearance up to the place of removal, namely, exempted goods and final products excluding exempted goods or when OSP provides two classes of services, namely exempted services and output services excluding exempted services, then the MFP or OSP shall exercise one of the two options, namely, (i) pay an amount equal to six per cent of value of the exempted goods and seven per cent of value of the exempted services, subject to a maximum of the sum total of opening balance of the Credit of input and input services available at the beginning of the period to which the payment relates and the credit on input and input services taken during that period or (ii) pay an amount as determined under sub-rule (3A).
4. The maximum limit prescribed in the first option would ensure that the amount to be paid does not exceed the Total Credit taken.
5. Sub-rule (3A) has been amended to provide the procedure and conditions for calculation of credit allowed and credit not allowed and directs that such credit not allowed shall be paid, provisionally for each month. The four key steps for calculating the credit required to be paid are :
   1. No Credit of inputs or input services used exclusively in manufacture of exempted goods or for provision of exempted services shall be available;
   2. Full Credit of input or input services used exclusively in final products excluding exempted goods or output services excluding exempted services shall be available;

3. Credit left thereafter is Common Credit and shall be attributed towards exempted goods and exempted services by multiplying the Common Credit with the ratio of value of exempted goods manufactured or exempted services provided to the total turnover of exempted and non-exempted goods and exempted and non-exempted services in the previous financial year;
4. Final reconciliation and adjustments are provided for after close of financial year by 30th June of the succeeding financial year, as provided in the existing rule.

6. A new sub-rule (3AA) has been inserted to provide that a MFP / OSP who has failed to follow the procedure of giving prior intimation, may be allowed by a Central Excise Officer, competent to adjudicate such case, to follow the procedure and pay the amount prescribed subject to payment of interest calculated at the rate of fifteen per cent. per annum
7. A new sub-rule (3AB) has been inserted as a transitional provision, to provide that, the existing Rule 6 of CCR 04 would continue to be in operation up to 30-6-16, for the units who are required to discharge the obligation in respect of financial year 2015-16.
8. Rule 6(3B) provides 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.

The said Sub-Rule (3B) of rule 6 has been amended so as to allow banks and other financial institutions to reverse CENVAT Credit in respect of exempted services as provided in sub-rules (1), (2) and (3), in addition to the option of 50% reversal.

9. An Explanation has been inserted, to the effect that "Value" for the purpose of Rules 6(3) & (3A) shall :

• 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.
• 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.
• 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.
• 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.
• Shall not include the value of extending deposits, loans or address in so far as consideration is represented by way of interest or discount.

However, wef 2-2-17,this clause shall not apply to a banking company and a financial institution including a non-banking financial company, engaged in providing services by way of extending deposits, loans and advances.

10. Sub-rule (4) has been amended to provide that where the CG are used for the manufacture of exempted goods or provision of exempted service for two years from the date of commencement of commercial production or provision of service, no CENVAT Credit shall be allowed on such CG. Similar provision is being made for CG installed after the date of commencement of commercial production or provision of service.
11. Sub-rule (7) has been amended so as to provide that credit taken on inputs and input services used in providing a service by way of “transportation of goods by a vessel from customs station of clearance in India to a place outside India” shall not be required to be reversed by the shipping lines. Service by way of transportation of goods by a vessel from customs station of clearance in India to a place outside India is being excluded from the definition of “exempted service” by amending rule 2(e) of CCR 04. Amendment in sub-rule (7) coupled with the corresponding amendment in the definition of “exempted Service” is aimed at allowing Credit of eligible inputs, input services and capital goods for providing the said service and providing Indian shipping lines a level playing field vis-a-vis the foreign shipping lines.
12. 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.
13. Rule 6(7) has been inserted, w.e.f. 1-7-12 to provides 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. VideClause 144 of the Finance Act, 2012, the aforesaid amendment has been made retrospective (wef 10-2-06)
14. W.e.f. 1-7-12, 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. W.e.f. 11-7-14, 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)

1. ISD has been defined to mean an office of MFP or OSP which receives invoice issued under Rule 4A of ST Rules 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.
2. ISD is required to be registered with Service Tax Dept.
3. Rule 7 has been completely revamped to allow an ISD to distribute the input Service Credit to an outsourced manufacturing unit also in addition to its own manufacturing units. Outsourced manufacturing unit is being defined to mean either a job-worker who is required to pay duty on the value determined under the provisions of rule 10A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, on the goods manufactured for the ISD or MFP who manufactures goods, for the ISD under a contract, bearing the brand name of the ISD and is required to pay duty on value determined under the provisions of Section 4A of CEA.
4. Presently, Rule 7 provides that Credit of Service tax attributable to services used by more than one unit shall be distributed pro rata, based on turnover, to all the units. An amendment has been made to provide that an ISD shall distribute CENVAT credit in respect of service tax paid on the input services to its manufacturing units or units providing output service or to outsourced manufacturing units subject to, the following conditions, in particular:
   1. Credit attributable to a particular unit shall be attributed to that unit only.
   2. Credit attributable to more than one unit but not all shall be to attributed to those units only and not to all units.

3. Credit attributable to all units shall be attributed to all the units.

Credit shall be distributed pro rata on the basis of turnover as is done in the present rules.

5. It is also provided that an outsourced manufacturing unit shall maintain separate account of credit received from each of the ISD and shall use it for payment of duty on goods manufactured for the ISD concerned. The credit of Service tax paid on input services, available with the ISD as on 31st of March, 2016 shall not be distributed to an outsourced manufacturing unit. Further, provisions of Rule 6 of CCR 04 relating to reversal of Credit in respect of inputs and input services used in manufacture of exempted goods or for provision of exempted services, shall apply to the units availing the CENVAT credit distributed by ISD and not to the ISD.

13. Distribution of Credits on inputs / CG and SAD

1. Rule 7A prescribes 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 mutandisto such offices or premises of the OSP.
2. Rule 7B has been inserted under CCR 04 so as to enable MFP with multiple manufacturing units to maintain a common warehouse for inputs and distribute inputs with credits to the individual manufacturing units. It is also provided that a MFP having one or more factories shall be allowed to take credit on inputs received under the cover of an invoice issued by a warehouse of the said manufacturer, which receives inputs under cover of an invoice towards the purchase of such inputs.

Procedure applicable to a first stage dealer or a second stage dealer would apply, mutatis mutandis, to such a warehouse of the MFP.

3. Sub-rule 10A provides a mechanism 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) provides 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 onpro ratabasis 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 utilized, 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 utilized, 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. An amendment is made to provide for filing of an annual return by a MFP / OSP for each financial year, by the 30th day of November of the succeeding year in the form as may be specified by a Notification to be issued.
9. An assessee is allowed 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.
3. Subject to provisions of Rule 10(3) of CCR 04, w.e.f. 2-2-17, transfer of CENVAT Credit shall be allowed within a period of 3 months from the date of receipt of application by the prescribed authority. The said time limit of 3 months, can be extended by the prescribed authority for a further period of 6 months, on sufficient cause being shown and reasons to be recorded in writing.

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 unutilized on that day shall be allowed as CENVAT credit to such MFP/OSP under these Rules, and shall be allowed to be utilized in accordance with CCR 04.

17. Recovery of CENVAT Credit Wrongly Taken or Erroneously Refunded

In cases where CENVAT Credit has been taken wrongly but not utilized, 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.

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 Section 11AC(1) (a) & (b) of CEA and Section 76(1) of the Act,.
4. Rule 15A under CCR 04, provides 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.

18. Prosecution

Availment and utilization 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.