G/L Account for CENVAT Offset

Records the excise duty calculated at the time of invoice verification. The values in this account and the CENVAT clearing account are balanced if there is no difference in the excise amounts at goods receipt and inovice verification.

Use

The values in this account and the CENVAT clearing account are compared after invoice verification.

Examples

Comparison of CENVAT clearing and offset accounts and the resultant postings:

If there is no difference in the amounts compared (say 100)

Dr. CENVAT clearing acct          100    Cr. CENVAT offset acct            100

If amount at invoice receipt (say 110) > amount at GR (say 100)

Dr. CENVAT plant acct             10    Cr. CENVAT clearing acct          100    Cr. CENVAT offset acct            110

If amount at invoice receipt (say 90) <  amount at GR (say 100)

Dr. CENVAT clearing acct          100    Cr. CENVAT plant acct             10    Cr. CENVAT offset acct            90

--0---------------------------

G/L account for Modvat Clearing

The G/L Account for Modvat Clearing is used to post the Excise amount(in case of material for which Modvat can be availed) at the time ofGoods Receipt(GR).

Use

The values in the Modvat Clearing Account and the Modvat OffsetAccount are compared after Invoice verification.

Examples

At GR, the Modvat amount is posted as follows :

               Modvat Plant A/c.         Dr.                   To Modvat Clearing A/c.

G/L Account for CENVAT On Hold

Records any CENVAT that is temporarily not available - and therefore "on hold" - until certain conditions are met.

Examples

Countervailing duty paid on imports is not available for utilization until receipt of the goods. On receipt of goods, the relevant duty is to be transferred to the appropriate CENVAT account of the plant.

G/L Account for CENVAT Suspense

Records excise duty from sales documents. The excise duty is subsequently paid from the CENVAT RG 23A, RG 23 C, or personal ledger accounts.

G/L account for PLA On Hold

General Ledger Account for PLA Suspense

Use

Cheques deposited, into the PLA Account maintained with the bank, are posted to this general ledger account initially, pending realisation.

The balance in this account is not available for payment of excise dutyon despatches until the intimation of realisation of cheque is receivedfrom the bank.

Subsequently, the realised amounts are transferred to the general ledger account for PLA maintained for the plant.

CIN-Register RG 23A and 23C

updated Oct 7, 2008 6:18 am | 12,527 views

Introduction

CIN means Country Version India comes with functions for calculating, posting, remitting, and reporting excise duty, and for handling incoming and outgoing excise invoices.

Country Version India offers two ways of calculating excise duty:

(1) Condition-based calculation procedures (TAXINN)- TAXINN is only supports condition-based excise determination

(2) Formula-based calculation procedures (TAXINJ) - TAXINJ supports condition-based excise determination and formula-based excise determination

As per Indian Law, the excise authorities require you to maintain the following registers relating to excise duty.

Register RG 1 Register RG 23A, Parts I and II (for raw materials) Register RG 23C, Parts I and II (for Capital goods) Register RG 23D (applicable only to Ist or IInd stage dealers) Personal Ledger Account (PLA)

Besides, ER-3 (formerly RT-12) returns have to be filed monthly (or quarterly for SSIs)

.

Register RT-12 Register RG 23A and 23C

When the ordered materials arrive, you post the goods receipt and the excise invoice. The R/3 system posts the excise duty to the appropriate accounts for deductible input taxes when you enter the excise invoice.

A record of all receipts and issues related to excisable materials is being kept in excise register in RG 23A (Raw Material) and RG 23C (Capital goods) by manufacturing plants. The register consists of two parts:

Part I shows the quantities of the materials. Part II shows the amounts of excise duty on the materials, and how much you have

transferred to the CENVAT accounts.

Part I Entries

When you enter a goods receipt for excisable materials, the system automatically asks you if you want to create the Part I entry in Register RG 23A or RG 23C. If so, the system generates a Part I entry. If not, it does not, but you can generate all missing Part I entries later.

In the following two cases, the system does not automatically generate Part I entries for goods issues of excisable materials;

A goods issue for vendor returns A goods issue for stock transport orders for plants (in case of Goods Movements

transaction only)

Part II Entries

The system automatically creates an entry in Part II of the appropriate register in case of posting of an incoming excise invoice, or an outgoing excise invoice. All Part II entries are serially numbered. An accounting document for each posting is created by the system to transfer the various types of excise duty to the appropriate CENVAT account.

CENVAT Document

A CENVAT document is an accounting document that the system automatically creates when it generates a Part II entry. The following accounting entry passed in case of Part II entry generation

For an incoming excise invoice;

Account Debit Credit Basic Excise Duty 1500.00 CENVAT Clearing Account 1500.00

The excise duty is cleared from the clearing account on entering of vendor invoice.

For an outgoing excise invoice;

Account Debit Credit CENVAT Suspense Account 1700 Basic Excise Duty 1500 PLA 200

Cenvat, or the Central Value Added Tax, is a component of the tax structure employed by many countries in the western section of Europe.

The inspiration for Cenvat is derived from a tax system that is generally referred to as VAT, or a Value Added Tax.

Both Cenvat and VAT are designed with the express purpose of minimizing a cascading effect when it comes to taxes on income, goods and services, and other forms of tax revenue.

The aim of Cenvat is to aid in maintaining a tax structure that is considered equitable for both the citizens incurring the tax and the government that is collecting the tax revenue.

One notable example of Cenvat can be found in India. Originally designated as a modified value added tax, this approach placed some limits on the type of taxation that could occur on goods used in the manufacturing process of finished consumer products. Modvat was later designated as Cenvat, and continued to function as a means of promoting industry within the country while still receiving some form of tax revenue from the effort.

It is helpful to think of Cenvat as an incentive that encourages the production of goods within the country, rather than outsourcing the production to countries where the economic and tax climate is more favorable. By providing a credit on the taxes associated with materials used in the creation of finished goods, the government makes it more attractive for manufacturers to maintain operations within the country. This of course leads to the creation of more jobs for the citizens within the community and provides income for the purchase of products within the country. By reducing the tax burden for

the end user of the materials, Cenvat opens the door to a more stable economy within the country, and a better standard of living for its citizens.

What is CENVAT (Central Value-added Tax) and how it is configured?

Anil

Before I am going to explain what is cenvat, you have to under stand the Indian tax Central Excise Duty (BED).  It is called as basic excise duty.  Every manufacturer is liable to pay the excise duty in various kinds namely Basic Excise Duty, Special Excise Duty, Additional Excise Duty etc.,  

Just think over a product which is reached to a end user, how many manufacturing activities are done.  So to reduce the tax burden of the end user, the Govt. of India introduce the MODVAT scheme which is now called CENVAT scheme.  

Based on this, if any manufacturer purchased a material, which is duty paid, and if it is used for his further manufacturing activity, he can avail this as credit in his book based on the Central Excise Invoice.  At the time of selling his manufactured goods, he is liable to pay the excise duty.  He can adjust the credit which he has taken into his book and pay the rest.  For example:

CENVAT availed at the time purchased various goods     Rs.20,000    (EXcise duty alone) CENVAT payable for his product at the time sales           Rs.25,000 He will pay only Rs.5000 through cash deposit in PLA.

This customizing are in SAP CIN Module.  If you are having the CIN CD, go through.  

K. SUNDAR

Good Explanation. In addition to this. The CENVAT means, Tax on Value Addition on the goods manufactured according to Central Excise & Customs Act Difinition. Here the value addition means the Additional Services/Activities etc. which converts the Input in to Output, and the output is newly recognised as per the this act as Exciseble goods. Like this the discussion is goes on for definition.

In 4.7 SAP version, there is no CIN version seperately, it is available with Standard SAP it self

Taxation of inputs, like raw materials, components and other intermediaries had a number of limitations. In production process, raw material passes through various processes stages till a final product emerges. Thus, output of the first manufacturer becomes input

for second manufacturer and so on. When the inputs are used in the manufacture of product `A', the cost of the final product increases not only on account of the cost of the inputs, but also on account of the duty paid on such inputs. As the duty on the final product is on ad valorem basis and the final cost of product `A' includes the cost of inputs, inclusive of the duty paid, duty charged on product `A' meant doubly taxing raw materials. In other words, the tax burden goes on increasing as raw material and final product passes from one stage to other because, each subsequent purchaser has to pay tax again and again on the material which has already suffered tax. This is called cascading effect or double taxation. This very often distorted the production structure and did not allow the correct assessment of the tax incidence. Therefore, the Government tried to remove these defects of the Central Excise System by progressively relieving inputs from excise and countervailing duties. An ideal system to realize this objective would have been to adopt value added taxation (VAT). However, on account of some practical difficulties it was not possible to fully adopt the value added taxation.

Hence, Government evolved a new scheme, `MODVAT' (Modified Value Added Tax). MODVAT Scheme which essentially follows VAT Scheme of taxation. i.e. if a manufacturer A purchases certain components(raw materials) from another manufacturer B for use in its product. B would have paid excise duty on components manufactured by it and would have recovered that excise duty in its sales price from A. Now, A has to pay excise duty on product manufactured by it as well as bear the excise duty paid by the supplier of raw material B. Under the MODVAT scheme, a manufacturer can take credit of excise duty paid on raw materials and components used by him in his manufacture. It amounts to excise duty only on additions in value by each manufacturer at each stage.

The modvat scheme is regulated by Rules 57A to 57U of the Central Excise Rules and the notifications issued there under (The Central Excise Rules, 2002 (Section 143 of the Finance Act, 2002).

Modvat Scheme ensures the revenue of the same order and at same time the price of the final product could be lower. Apart from reducing the costs through elimination of cascade effect, and bringing in greater rationalization in tax structure and also bringing in certainty in the amount of tax leviable on the final product, this scheme will help the consumer to understand precisely the impact of taxation on the cost of any product and will, therefore, enable consumer resistance to unethical attempts on the part of manufacturers to raise prices of final products, attributing the same to higher taxes.

Subsequently, MODVAT scheme was restructured into CENVAT( Central Value Added Tax) scheme. A new set of rules 57AA to 57AK , under The Cenvat Credit Rules, 2004, were framed and whatever restrictions restrictions were there in MODVAT Scheme were put to an end and comparatively, a free hand was given to the assesses.Under the Cenvat Scheme, a manufacturer of final product or provider of taxable service shall be allowed to take credit of duty of excise as well as of service tax paid on any input received in the factory or any input service received by manufacturer of final product.

The term "Input" means: -

All goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production

All goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service; Explanation 1 : The light diesel oil, high-speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever.

Explanation 2 : Inputs include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer;"

The term "Input service" means any service: -

Used by a provider of taxable service for providing an output service; or

Used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from th

What is the difference between VAT and CENVAT

Well......VAT - Value Added TaxWhile CENVAT - Central Value Added Tax

VAT- Value Added TaxVAT is a sales tax collected by the government (of the state in which the final consumer is located) – which is the government of destination state on consumer expenditure.

Over 120 countries worldwide have introduced VAT over the past three decades and India is amongst the last few to introduce it.

India already has a system of sales tax collection wherein the tax is collected at one point (first/last) from the transactions involving the sale of goods. VAT would, however, be collected in stages (instalments) from one stage to another.

The mechanism of VAT is such that, for goods that are imported and consumed in a particular state, the first seller pays the first point tax, and the next seller pays tax only on the value-addition done – leading to a total tax burden exactly equal to the last point tax.

CENVAT - Central Value Added Tax

CENVAT is the new name for MODVAT. Basically they are the same. These are related to central excise.CENVAT means, Tax on Value Addition on the goods manufactured according to Central Excise & Customs Act Difinition. Here the value addition means the Additional Services/Activities etc. which converts the Input in to Output, and the output is newly recognised as per the this act as Exciseble goods. Like this the discussionis goes on for definition.

        1) Define “inputs” 

“Inputs” include all goods used in or in relation to the                manufacture of  final products whether directly or indirectly, whether                contained in the final product or not. (Rule 2).

        2) Define “capital goods”

“Capital goods” means

       i)               all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, Chapter Heading No. 68.02 and Chapter sub-heading No. 6801.10 of the First Schedule to the Central Excise Tariff Act, 1985;

      ii)              Pollution Control Equipments;

     iii)                Components, spares and accessories of the goods specified       at (i) and (ii) above;

     iv)                Moulds and dies;

     v)                  Refractories and refractory materials;

    vi)                Tubes and pipes and fittings thereof and

    vii)              Storage tank

                      used in the factory of the manufacturer of the final products but                       does not include any equipment or appliance used in an office. (Rule 2). 

          3) What are “final products”?

      “Final products” are defined as excisable goods manufactured from 

             inputs, except matches. (Rule 2).

         4) What is the definition of “exempted goods”?

  “Exempted goods” means goods, which are exempt from the whole               of the duty of excise leviable thereon, and includes goods, which                are chargeable to Nil rate of duty. (Rule 2).     

        5) What are the duties allowed as CENVAT credit to a                  manufacturer or producer of final products?

        A manufacturer or producer of final products shall be allowed to                    take credit of

               i)   the duty of excise specified in the First Schedule to the Tariff Act,                    leviable under the Act;

        ii)    the duty of excise specified in the Second Schedule to the Tariff Act, leviable under the Act;

       iii)   the additional duty of excise leviable under Section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978;

       iv)    the additional duty of excise leviable under Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957;

       v)   the National Calamity Contingent Duty leviable under Section 136 of the Finance Act, 2001 and

       vi)  the additional duty leviable under Section 3 of the Customs Tariff Act, 1975 equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv) and (v) above paid on any inputs or capital goods received in the factory. (Rule 3).

           6) What are the conditions for allowing CENVAT Credit?

               I) The CENVAT credit in respect of inputs may be taken                    immediately on receipt of the inputs in the factory of the                    manufacturer.

              II (a) 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 per cent of the duty

paid on such capital goods in the same financial year.

             II (b) 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, if the                        capital  goods, other than components, spares and                        accessories, refractories and refractory materials and goods                        falling under heading No. 68.02 and sub-heading No. 6801.10                        of the First Schedule  to the Tariff Act are in the possession                        and use of the manufacturer of final products in such                       subsequent years.

             III) The CENVAT credit in respect of the capital goods shall be                   allowed to a manufacturer even if the capital goods are acquired                   by him on lease, hire purchase or loan agreement, from a                   financing company.

            IV) The CENVAT credit in respect of capital goods shall not be                    allowed if the manufacturer claims depreciation on that part of the                    value of such capital goods that represents the amount of duty on                    such capital goods.

           V) The CENVAT credit is 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, re-conditioning or any                  other purpose subject to the condition that the goods are received                  back in the factory within one hundred and eighty days of their                  being sent to a job worker. If the inputs or the capital goods are                  not received within one hundred and eighty days, the manufacturer                  shall pay an amount equivalent to the CENVAT credit taken. But                  the manufacturer can take the CENVAT credit again when the                  inputs or capital goods are received back min his factory.

          VI) The Commissioner of Central Excise having jurisdiction over the                 factory of the manufacturer of final products who has sent the inputs                 or the partially processed inputs to a job worker may allow final                 products to be cleared from the premises of the job worker subject                 to such conditions he may impose in the interest of Revenue                 including the manner of payment of duty.

 (Rule 4).

          7) Explain the situation where CENVAT credit is refunded.

       If a manufacturer is unable to utilise CENVAT credit taken on 

               inputs for reasons of having no clearances for home consumption or                not exporting on payment of duty, such accumulated CENVAT                credit will be refunded to him subject to safeguards, conditions and                 limitations specified by the Central Government by notification.

(Rule 5).

          8) What is the obligation of the manufacturer of dutiable and exempted goods?

          a)    The CENVAT credit shall not be allowed on inputs used in the                 manufacture of exempted goods.

    b)      If a manufacturer avails CENVAT credit on inputs other than fuel and manufactures both dutiable and exempted goods, then he shall maintain separate accounts for receipt, consumption and inventory of inputs meant for use in the dutiable final products and the quantity of inputs meant for use in the manufacture of exempted goods and take CENVAT credit only on that quantity of inputs which is intended for use in the manufacture of dutiable goods.

    c)     The manufacturer, opting not to maintain separate accounts shall follow either of the following conditions, as applicable to him:

i)                    if the exempted goods are as described in sub-rule (3) (a) of Rule 6 of CENVAT Credit Rules, 2002, the manufacturer shall pay an amount equivalent to the CENVAT credit attributable to inputs used in or in relation to the manufacture of such final products at the time of clearance from the factory; or

ii)                  if the exempted goods are other than those described in (i), the manufacturer shall pay an amount equal to eight per cent of the total price, excluding sales tax and other taxes, if any paid on such goods, of the exempted final product charged by the manufacturer for the sale of such goods at the time of their clearance from the factory.

 d)         No CENVAT credit is allowed on capital goods, which are used exclusively in the manufacture of   exempted goods. But this provision will not apply if exemption is granted to such goods based on the value or quantity of clearances made in a financial year.

    e) None of the above provisions shall apply in case the exempted goods are either-

i)       cleared to a unit in a free trade zone; or

ii)     cleared to a unit in a special economic zone; or

iii)   cleared to a hundred per cent export oriented undertaking; or

iv)    cleared to a unit in an Electronic Hardware Technology Park or Software Technology Park; or

v)      supplied to the United Nations or an international organization for their official use or supplied to projects funded by them in terms of Notification No. 108/95-CE dated 28.08.1995; or

vi)    cleared for the export under bond.

vii)  Gold or silver falling within Chapter 71 of the First Schedule arising in the course of manufacture of copper or zinc by smelting.

(Rule 6)

                9) Whether the storage of inputs outside the factory of the manufacturer is permitted?

            The Assistant/Deputy Commissioner of Central Excise having                jurisdiction over the factory of a manufacturer of final products may,                in exceptional circumstances having regard to the nature of the               goods and shortage of storage space at the premises of the               manufacturer, permit such manufacturer to store the inputs on which               CENVAT credit has been taken, outside the factory subject to such               limitations and conditions specified by him.

  If such inputs are not used in the manner prescribed in the              CENVAT Credit Rules, 2002 for any reason, the manufacturer of the              final products shall pay an amount equal to the credit availed in              respect of such inputs. 

(Rule 6A)

             10) What are the documents on the basis of which CENVAT credit may be taken by a                       manufacturer of the final products?

                     i)    an invoice issued by-

  a)     a manufacturer of inputs or capital goods from his factory or

from his depot or from the premises of the consignment agent or from any other premises from where the goods are sold by or on behalf of the said manufacturer;

  b)     a manufacturer of final products for the removal of inputs or capital goods as such;

  c)      an importer

  d)     an importer from his registered depot or from the registered premises of the consignment agent of the said importer;

 e)     a first stage dealer or a second stage dealer of excisable or imported goods;

ii)      a supplementary invoice issued by a manufacturer or importer of inputs or capital goods from his factory or from his depot or from the premises of the consignment agent of the said manufacturer or importer or from any other premises from where the goods are sold by or on behalf of the said manufacturer or importer, in case additional amount of Excise or Customs duties has been paid. But this provision will not apply in cases where the additional duties become payable on account of any non-levy or short levy by reason of fraud, collusion or any willful mis-statement or suppression of facts or contravention of the Act or the rules made thereunder with intent to evade payment of duty;

         iii)      a biil of entry;

         iv)      a certificate issued by an appraiser of customs in respect of goods imported through a   Foreign Post Office.

(Rule 7)

             11) What are the reasonable steps a manufacturer taking                       CENVAT credit on inputs or capital goods shall take to                       ensure that appropriate duty of excise has been paid on                       the inputs or capital goods received by him?

A manufacturer taking CENVAT credit on inputs or capital                       goods received by him shall be deemed to have taken                      reasonable steps if he satisfies himself about the identity and                      address of the manufacturer or supplier, as the case may be,                      issuing the document specified in Rule 7, evidencing the  be,

                     payment of excise duty or the additional duty of customs, as the                      case may either-

a)     from his personal knowledge; or

b)     on the strength of a certificate given by a person with whose handwriting or signature he is familiar; or

c)      on the strength of a certificate issued to the manufacturer or the supplier, as the case may be, by the Superintendent of Central Excise within whose jurisdiction such manufacturer has his factory or the supplier has his place of business.

                               The manufacturer or producer taking CENVAT credit shall                         retain such certificate for production before the proper officer                         on demand.

(Rule 7)

              12) What are the records to be maintained by the manufacturer of final products?

  The manufacturer of final products shall maintain proper                          records for the receipt, disposal, consumption and inventory of                          the inputs and capital goods and in such records information                         regarding the value, duty paid, the person from whom the                         inputs or capital goods have been procured is to be recorded. The burden of proof regarding the admissibility of the                           CENVAT credit shall lie upon the manufacturer taking credit. A monthly return within ten days from the close of each month                           has to be submitted to the Superintendent of Central Excise                          by the manufacturer of final products.

(Rule 7)

           13)   When shall the transfer of CENVAT credit allowable?

  If a manufacturer of the final products shifts his factory to                 another site or the factory is transferred on account of change in                 ownership or on account of sale, merger, amalgamation, lease                 or transfer of the factory to a joint venture with the specific provision                 for transfer of liabilities of such factory, then the manufacturer shall                 be allowed to transfer the CENVAT credit lying unutilized in his                 accounts to such transferred, sold, merged, leased or                 amalgamated factory. But such transfer of credit shall be allowed 

                only if the stock of inputs as such or in process or the capital goods                 is also transferred along with the factory to the new site or                 ownership and the inputs or capital goods on which credit has been                 taken are duly accounted to the satisfaction of Commissioner,                 Assistant /Deputy Commissioner of Central Excise, as the case                 may be.

(Rule 8).

         14) Please explain transitional provisions.

        As per these provisions, any amount of credit earned by a                  manufacturer under erstwhile Central Excise Rules, 1994 as they                  existed prior to the 1st day of July 2001 and remaining                 unutilized on that day shall be allowable as CENVAT credit to such                 manufacturer and he shall be allowed to utilize such credit.

  If a manufacturer opts for exemption from whole of the duty of                 excise leviable on goods manufactured by him under SSI                 notification in a financial year, he shall be required to pay an                 amount equivalent to the CENVAT credit, if any allowed to him in                 respect of inputs lying in stock or used in any final products lying in                 stock on the date when such option is exercised. After deducting                 the said amount from the balance, if any, lying in his credit, the                 balance, if any, still remaining shall lapse and shall not be allowed                 to be utilized for payment of duty on any excisable goods, whether                 cleared for home consumption or for export.

(Rule 9)

        15) What is deemed credit?

  The Central Government may, by notification, declare the inputs on which the duties of excise, or additional duty of customs paid, shall be deemed to have been paid at such rate or equivalent to such amount as may be specified in the said notification and allow CENVAT credit of such duty deemed to have been paid in such manner and subject to such conditions as may be specified in the said notification even if the declared inputs are not used directly by the manufacturer of final products declared in the said notification, but are contained in the said final products.

(Rule 11)

          16) What action shall be taken to recover CENVAT credit wrongly

taken?

  If a manufacturer takes CENVAT credit wrongly or utilizes such               credit wrongly, the same shall be recovered from such manufacturer               under the provisions of Rule 12 of the CENVAT Credit Rules, 2002               read with the provisions of Section 11A of the Central Excise Act,                1944. In addition to therecovery of wrong credit, interest on such               wrong credit shall also be recovered under the provisions of              Rule 12 of the said Rules read with Section 11AB of the said Act.

(Rule 12)

           17) What is the penal provision under which a person taking wrong CENVAT credit may be                       proceeded against?

             If any person takes CENVAT credit wrongly or without taking                 reasonable steps to ensure appropriate duty on the inputs or                 capital goods has been paid or contravenes any of the provisions                of CENVAT Credit Rules, 2002 in respect of any inputs or capital                goods, then all such goods shall be liable to confiscation and such                person shall be liable to a penalty not exceeding the duty on such                excisable goods or ten thousand rupees, whichever is higher.

            In a case, where CENVAT credit has been taken or utilised               wrongly on account of fraud, willful misstatement, collusion or               suppression of facts or contravention of any of the provisions of the               Act or the rules made thereunder with intention to evade payment of               duty, then the manufacturer shall also be liable to pay penalty in               terms of the provisions of Section 11AC of the Central Excise Act,               1944.

(Rule 13)

what is cenvat credit expain it

Answer# 1

CENVAT (Central Value Added Tax )Credit Meens, Input tax of purchase of Raw Materials, Packing Material, Fixed Assets and Consumables. This Input tax credit we can setoff the tax payble which we have to pay to the government

 

3 A.palani Raja

Is This Answer Correct ?   

135 Yes 22 No

 

  Re: what is cenvat credit expain it

Answer# 2

CENVAT (Central Value Added Tax) credit is the the set off of the duty paid on inputs and capital goods and also service tax paid on input service against the Excise duty on final products or service tax o input service.

Ex:-1. Purchased Raw Material (inputs) Rs.110 (Includes 10% Tax paid on it i.e. Rs.10)2. Value addition Rs.2003. Total (1+2) Rs.3104. Excise Duty on (3) above, Say 20% i.e Rs. 62 -----------------------If Cenvat credit,is there,Cost of Product= [(110-10)+200+ 20%(100+200)]=Rs.360

If Cenvat credit,is not there,Cost of Product= [110+200+ 20%(100+200)]=Rs.372

BRIEF NOTE ON CENVAT CREDIT

--------------------------------------------------------------------------------

Dear Friends

I have prepared small notes on Cenvat credit. I sought your help to include some more points make it understandable to our forum members. I have given lecture to our company executives and we have to fine tune the same.

Regards

AKM

1986 MODIFIED VALUE ADDED TAX i.e. MODVAT INTRODEUCED BY THE CENTRAL GOVERNMENT WHICH ENABLED THE MANUFACTURERS TO AVAIL

CREDIT OF EXCISE DUTY PAID ON THE INPUT USED IN OR IN RELATION TO MANUFACTURE OF END PRODUCT

OFFSET OF DUTY PAID ON INPUT STAGE AGAINST DUTY PAYABLE AT THE FINAL STAGE.

IN 1994, MODVAT WAS EXTENDED TO CAPITAL GOODS

MODVAT SCHEME WAS RECHRISTENED TO BE CALLED CENTRAL VALUE ADDED TAX SCHEME i.e. CENVAT SCHEME

IN 2000 WITH THE OBJECT TO CONSOLIDATE AND UNIFY THE RULES 57AA TO 57AK FOR CAPITAL GOODS AND INPUT GOODS INTO ONE SET OF RULES THE CENVAT CREDIT RULES, 2001 WAS FRAMED

IT WAS FURTHER SIMPLIFIED AND REVIEWED INTO NEW CENVAT CREDIT RULES 2002.

SCHEME DESIGNED TO REDUCE THE CASCADING EFFECT OF INDIRECT TAXES ON FINAL PRODUCTS.

Particulars Under non-Cenvat Rs. Under Cenvat Rs.A Raw material 100 100 Add excise duty @16% 16 16 Total 116 116 Credit allowable Nil 16 Net cost of X 116 100 B Value Addition 100 100 Product Y 216 200 Add excise duty @16% 34.56 32 Total cost 240.56 232 Credit allowable Nil 32 Net cost of X 240.56 200 c Value Addition 100 100 Product Z 340.56 300 Add excise duty @16% 54.40 48 Total cost of Z 394.56 348 Credit allowable Nil 48 Net cost Z 394.56 300

Sailent features of New CENVAT CREDIT RULES, 2004

New Cenvat Credit Rules 2004 have been introduced with effect from 10-9-2004 in place of earlier CENVAT CREDIT RULES , 2002 AND SERVICE TAX CREDIT RULES,2O02

This credit can be utilized for payment of excise duty on final products and service tax on output services. Credit taken on input services can be used for payment of excise duty and vice versa.

Credit can be taken for all services used in relation to setting up, modernization or repairs of a factory, services relating to advertisement or sales promotion, management, recruitment etc.

UTILISATION OF CENVAT CREDIT

Rule 3 (4) provides that the Cenvat credit may be utilised for payment of

a) any duty of excise on any final product or b) an amount equal to Cenvat credit taken on inputs if such inputs are removed as such or after being partially processed, or c) an amount equal to the cenvat credit taken on capital goods if such goods are removed as such or d) an amount under sub rule (2) of rule 16 of Central Excise rules 2002 or e) Service tax on any output service.

Rule 3 of the CENVAT credit Rules 2004 lays down the provisions related Cenvat Credit as follows:-

Specified duties of which Credit is available

Rule 3(1) provides that a manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit of the following duties.

1) Excise duty 2) Special Excise duty 3) Additional Excise duty under section 3 of the Additional Duties of excise (Textile and Textiles Articles) Act, 1978 4) Additional duty of Excise 5) National Calamity Contingent duty 6) Education cess 7) additional custom duty

Additional Excise duty leviable under section 157 of the finance act 2003 9) Service tax 10) Education cess on taxable services

Rule 3 (2) provides that the manufacturer or producer of final products shall be allowed to take CENVAT credit of the duty paid on inputs lying in stock or in process or inputs contained in the final products lying in the stock on the date on which any goods manufactured by the said manufacturer or producer cease to be exempted goods or any goods become excisable.

Rule 3(3) provides that in relation to a service which ceases to be an exempted service exempted service, the provider of output service shall be allowed to take CENVAT credit of the duty paid on the inputs received on and after 10th day of September 2004 and lying in stock on the date on which any service ceases to be an exempted service and used for providing such service.

In jaypee Rewa Cement Ltd Vs CCE the Supreme Court held that even where inputs are used outside the factory premises, but if the same were essential for manufacturing process, the same shall be eligible for CENVAT CREDIT.

The procedure to avail CENVAT Credit on input as set out in rules 3 and 4 are as follows:

1. Receipt of goods

Available on receipt of the materials only ownership of the material is irrelevant for the purposes of claiming Cenvat Credit on inputs invoices should be addressed to the manufacture and/or inputs consigned to him admissible in proportion to usable and actual quantity received.

2. Eligibility

Eligibiltiy under the rules is determined by the exclusion

Except HSD and Petrol, all inputs used in or in relation to manufacture, directly or indirectly are eligible.

Check whether the inputs are used for the manufacture of exempted goods

if so Goods used only for manufacture of exempted products, where no credit can be availed.

Goods used only for manufacture of dutiable products where credit can be availed.

Goods being used for both the dutiable products as well as exempted products but the quantum of use at the stage of receipt of inputs is not ascertainable. In such case credit should be availed and at the time of removal, but reversal of amount equal to 8% of the value of exempted final product, is admissible in terms of rule 6 (3) (b)

Goods being used for both the dutiable products as well as the exempted products, but the quantum of use is ascertainable at the time of receipt. In such case, the credit should be availed only for the inputs, used for dutiable final product. However the inputs should be separately recorded, stored and issued.

Transfer of CENVAT CREDIT

Rule 10 lays down the following provisons for transfer of Cenvat Credit

1) If a manufacturer of the final products shifts his factory to another site or the factory is transferred on account of change in ownership or on account of

merger, amalgamation, lease or transfer of the factory to a joint venture with the specific provision for transfer of liabilities of such factory, then the manufacturer shall be allowed to transfer the Cenvat credit lying unutilized in his accounts to such transferred sold mreged, leased or amalgamated factory

2) If a provider of output service shifts or transfers his business on account of change in ownership or on account of of merger, amalgamation, lease or transfer of the business to a joint venture with the specific provision for transfer of liabilities of such business, then the provider of output service shall be allowed to transfer the Cenvat credit lying unutilized in his accounts to such transferred, sold to such transferred sold mreged, leased or amalgamated factory 3) The transfer of the Cenvat credit shall be allowed only if the stock of inputs as such or in process or the capital goods is also transferred along with the factory or business premises to the new site or ownership and the input or capital goods on which credit has been availed of are duly accounted for to the satisfaction of the Deputy Commissioner of Central Excise or as the case may be, the Assistant Commissioner of Central Excise.

Penalty:

Rule 15 provides Confiscation and Penalty

1) If any person takes CENVAT Credit in respect of capital goods wrongly or without taking reasonable steps to ensure that appropriate duty on the said input or capital goods has been paid as indicated in the document accompanying the input or capital goods specified in rule 9 or contravenes any of the provision of these rules in respect of any input or capital goods , then all such goods shall be liable to confiscation and such person, shall be liable to a penalty not exceeding the duty on the exercisable goods in respect of which any contravention has been committed or ten thousand rupees whichever is greater.

2) In a case where the CENVAT credit in respect of input or capital goods has been taken or utilized wrongly on account of fraud, wilful mis-statement, collusion or supression of facts or contravention of any of the provision of the Excise Act or the rules made thereunder with intention to evade payment of duty, then the manufacturer shall also be liable to pay penalty in terms of the provisions of Section 11AC 3) If any person takes CENVAT credit in respect of input services, wrongly or without taking reasonable steps to ensure that appropriate service tax on the said input services has been paid as indicated in the document accompanying the input services specified in Rule 9, or contravenes any of the provisions of these rules in respect of any input service, then such person shall be liable to a penalty which may extend to amount not exceeding ten thousand rupees.