CENVAT credit may be taken and
utilized on inputs, capital goods and input services. Rule 4 provides
for the conditions for taking the credit including the time limit. In
this article the time limit for taking CENVAT credit for the above three
is to be discussed.
Inputs
Rule 4 (1) of CENVAT Credit Rules, 2004 (‘Rules’ for short) provides that the CENVAT credit in
respect of inputs may be taken-
immediately on receipt of inputs-
in the factory of the manufacturer; or
in the premises of the provider of output service; or
in
the premises of job worker in case the goods are sent directly to the
job worker on the direction of the manufacturer or the provider of
output service; (with effect from 01.03.2015)
in respect of final
products, namely, articles of jewellery or other articles of precious
metals falling under heading 7113 or 7114 as the case may be of the
First Schedule to the Excise Tariff Act, the CENVAT credit of duty paid
on inputs may be taken immediately on receipt of such inputs in the
registered premises of the person who get such final products
manufactured on his behalf, on job work basis, subject to the condition
that the inputs are used in the manufacture of such final product by the
job worker;
The other condition for taking CENVAT credit on
inputs is that the manufacturer or the provider of output service shall
not take CENVAT credit after one year of the date of issue of any of the
documents specified in sub- rule (1) of rule 9. This condition is with
effect from 01.03.2015. Before that the limitation is six month from
01.09.2014 to 28.02.2015.
Capital goods
Rule
4(2) provides for the taking of credit on excise duty paid on capital
goods. The CENVAT credit in respect of capital goods received-
in a factory;
or in the premises of the provider of output service; or
outside
the factory of the manufacturer of the final products for generation of
electricity for captive use within the factory or in the premises of
the job worker, in case capital goods are sent directly to the job
worker on the direction of the manufacturer or the provider of output
service, as the case may be,
at any point of time in a given
financial year shall be taken only for an amount not exceeding 50% of
the duty paid on such capital goods 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 capital goods were received in the
factory of the manufacturer, or in the premises of the provider of
output service, if the capital goods, other than components, spares and
accessories, refractories and refractory materials, moulds and dies and
goods falling under heading 6805, grinding wheels and the like, and
parts thereof falling under heading 6804 of the First Schedule to the
Excise Tariff Act, are in the possession of the manufacturer of final
products, or provider of output service in such subsequent years.
The
CENVAT credit in respect of capital goods shall be allowed for the
whole amount of the duty paid on such capital goods in the same
financial year if such capital goods are cleared as such in the same
financial year.
The CENVAT credit of the additional
duty leviable under Section 3(5) of the Customs Tariff Act, in respect
of capital goods shall be allowed immediately on receipt of the capital
goods in the factory of a manufacturer.
Where an
assessee is eligible to avail of the exemption under a notification
based on the value of clearances in a financial year, the CENVAT credit
in respect of capital goods received by such assessee shall be allowed
for the whole amount of the duty paid on such capital goods in the same
financial year.
Input Services
Rule
4(7) provides for taking credit of service tax in respect of input
services. The CENVAT credit in respect of input service shall be
allowed, on or after the day on which the invoice, bill or, as the case
may be, challan referred to in rule 9 is received. If the credit is
availed on or after the day on which the invoice is received, the
payment in respect of the invoice shall be paid within three months from
the date of invoice. Otherwise the credit already taken is to be
reversed.
The manufacturer or the provider of output
service shall not take CENVAT credit after one year of the date of issue
of any of the documents specified in sub-rule (1) of rule 9. This
condition is applicable with effect from 01.03.2015. Before that the
time limit is six months from 01.09.2014 to 28.02.2015. Before that
there is no time limit prescribed for taking the credit.
Input Service Distributor
Rule
9(1)(g) provides that the CENVAT credit may be taken on an invoice,
bill, challan issued by an Input Service Distributor under Rule 4A of
Service Tax Rules, 1994. CENVAT credit on such invoice may be taken
within one year from the date of invoice of the Input Service
Distributor.
Time limit for Re-credit
The following are the situations in which CENVAT credit is required to be reversed and credit can be re-taken:
Rule
4(7) provides that the credit on input services shall be allowed on
receipt of the invoice, bill, challan. But if the bill is not paid
within three months the credit taken is to be reversed. Subsequently,
when such payments of value input service and service tax is made, the
amount so paid back can be re-credited;
Rule 3(5B) provides that
if the value of any input or capital goods before putting use on which
CENVAT credit has been taken, is written off or such provisions made in
Books of Account, the manufacturer or service provider is required to
pay an amount equal to credit so taken. However when the inputs or
capital goods are subsequently used, the amount so paid can be
re-credited in the account.
Rule 4(5)(a) prescribes that in case
inputs sent to job worker are not received back within 180 days, the
manufacturer or service provider is required to pay an amount equal to
credit taken on such inputs in the first instance. However, when the
inputs are subsequently received back from job worker, the amount so
paid can be re-credited in the account.
The Circular No.
990/14/2014-CX-8, dated 19.11.2014 clarifies that the purpose of fixing
the limitation for taking credit is to ensure that after issue of a
document under Rule 9(1), credit is taken for the time within one year
of the issue of the document. Once this condition is met, the
limitation of one year has no further application. Therefore in the
above three situations, limitation of one year would apply when the
credit is taken for the time on an eligible document. It would not
apply for taking re-credit of amount reversed, after meeting the
conditions prescribed in the rules.
Input services under Reverse charge mechanism
In
respect of input service where whole or part of the service tax is
liable to be paid by the recipient of service, credit of service tax
payable by the service recipient shall be allowed after such service tax
is paid. Author’s view is that the limitation of one year will not be
applicable to RCM.