1. 10[Obligation of a manufacturer or producer of final products and a 31[provider of output service]

 41[(1) The CENVAT credit shall not be allowed on such quantity of input as is used in or in relation to the manufacture of exempted goods or for provision of exempted services or input service as is used in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provision of exempted services and the credit not allowed shall be calculated and paid by the manufacturer or the provider of output service, in terms of the provisions of sub-rule (2) or sub-rule (3), as the case may be :

Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule.

Explanation 1.- For the purposes of this rule, exempted goods or final products as defined in clauses (d) and (h) of rule 2 shall include non-excisable goods cleared for a consideration from the factory.

Explanation 2.- Value of non-excisable goods for the purposes of this rule, shall be the invoice value and where such invoice value is not available, such value shall be determined by using reasonable means consistent with the principles of valuation contained in the Excise Act and the rules made there under.

Explanation 3. – For the purposes of this rule, exempted services as defined in clause (e) of rule 2 shall include an activity, which is not a ‘service‘ as defined in section 65B(44) of the Finance Act, 1994.

Explanation 4. – Value of such an activity as specified above in Explanation 3, shall be the invoice/agreement/contract value and where such value is not available, such value shall be determined by using reasonable means consistent with the principles of valuation contained in the Finance Act, 1994 and the rules made thereunder.]

42[(2)  A manufacturer who exclusively manufactures exempted goods for their clearance upto the place of removal or a service provider who exclusively provides exempted services shall pay the whole amount of credit of input and input services and shall, in effect, not be eligible for credit of any inputs and input services.]

43[(3) (a) A manufacturer who manufactures two classes of goods, namely :-

(i) non-exempted goods removed;

(ii) exempted goods removed; or

(b) a provider of output service who provides two classes of services, namely:-

(i) non-exempted services;

(ii) exempted services,

shall follow any one of the following options applicable to him, namely :-

 49[(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 of input and input services taken during that period; or;]

(ii) pay an amount as determined under sub-rule (3A):

Provided that if any duty of excise is paid on the exempted goods, the same shall be reduced from the amount payable under clause (i):

Provided further that 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 specified in clause (i) shall be seven per cent. of the value so exempted :

Provided also that in case of transportation of goods or passengers by rail, the amount required to be paid under clause (i) shall be an amount equal to two per cent. of value of the exempted services.

Explanation 1.- If the manufacturer of goods or the provider of output service, avails any of the option under this sub-rule, he shall exercise such option for all exempted goods manufactured by him or, as the case may be, all exempted services provided by him, and such option shall not be withdrawn during the remaining part of the financial year.

Explanation 2.- No CENVAT credit shall be taken on the duty or tax paid on any goods and services that are not inputs or input services.

Explanation 3.- For the purposes of this sub-rule and sub-rule(3A),-

(a) “non-exempted goods removed” means the final products excluding exempted goods manufactured and cleared upto the place of removal;

(b) “exempted goods removed” means the exempted goods manufactured and cleared upto the place of removal;

(c) “non-exempted services” means the output services excluding exempted services.

  44[(3A) For determination of amount required to be paid under clause (ii) of sub-rule (3), the manufacturer of goods or the provider of output service shall follow the following procedure and conditions, namely :-

(a) the manufacturer of goods or the provider of output service shall intimate in writing to the Superintendent of Central Excise giving the following particulars, namely :-

(i) name, address and registration number of the manufacturer of goods or provider of output service;

(ii) date from which the option under this clause is exercised or proposed to be exercised;

(iii) description of inputs and input services used exclusively in or in relation to the manufacture of exempted goods removed or for provision of exempted services and description of such exempted goods removed and such exempted services provided;

(iv) description of inputs and input services used exclusively in or in relation to the manufacture of non-exempted goods removed or for the provision of non-exempted services and description of such non-exempted goods removed and non-exempted services provided ;

(v) CENVAT credit of inputs and input services lying in balance as on the date of exercising the option under this condition;

(b) the manufacturer of final products or the provider of output service shall determine the credit required to be paid, out of this total credit of inputs and input services taken during the month, denoted as T, in the following sequential steps and provisionally pay every month, the amounts determined under sub-clauses (i) and (iv), namely:-

(i) the amount of CENVAT credit attributable to inputs and input services used exclusively in or in relation to the manufacture of exempted goods removed or for provision of exempted services shall be called ineligible credit, denoted as A, and shall be paid;

(ii) the amount of CENVAT credit attributable to inputs and input services used exclusively in or in relation to the manufacture of non-exempted goods removed or for the provision of non-exempted services shall be called eligible credit, denoted as B, and shall not be required to be paid;

(iii) credit left after attribution of credit under sub-clauses (i) and (ii) shall be called common credit, denoted as C and calculated as,-

C = T – (A + B);

Explanation.– Where the entire credit has been attributed under sub-clauses (i) and (ii), namely ineligible credit or eligible credit, there shall be left no common credit for further attribution.

(iv) the amount of common credit attributable towards exempted goods removed or for provision of exempted services shall be called ineligible common credit, denoted as D and calculated as follows and shall be paid, –

D = (E/F) x C;

where E is the sum total of –

(a) value of exempted services provided; and

(b) value of exempted goods removed,

during the preceding financial year;

where F is the sum total of-

(a) value of non-exempted services provided,

(b) value of exempted services provided,

(c) value of non-exempted goods removed, and

(d) value of exempted goods removed,

during the preceding financial year:

Provided that where no final products were manufactured or no output service was provided in the preceding financial year, the CENVAT credit attributable to ineligible common credit shall be deemed to be fifty per cent. of the common credit;

(v) remainder of the common credit shall be called eligible common credit and denoted as G, where,-

G = C – D;

Explanation.- For the removal of doubts, it is hereby declared that out of the total credit T, which is sum total of A, B, D, and G, the manufacturer or the provider of the output service shall be able to attribute provisionally and retain credit of B and G, namely, eligible credit and eligible common credit and shall provisionally pay the amount of credit of A and D, namely, ineligible credit and ineligible common credit.

(vi) where manufacturer or the provider of the output service fails to pay the amount determined under sub-clause (i) or sub-clause (iv), he shall be liable to pay the interest from the due date of payment till the date of payment of such amount, at the rate of fifteen per cent. per annum;

(c) the manufacturer or the provider of output service shall determine the amount of CENVAT credit attributable to exempted goods removed and provision of exempted services for the whole of financial year, out of the total credit denoted as T (Annual) taken during the whole of financial year in the following manner, namely :-

(i) the CENVAT credit attributable to inputs and input services used exclusively in or in relation to the manufacture of exempted goods removed or for provision of exempted services on the basis of inputs and input services actually so used during the financial year, shall be called Annual ineligible credit and denoted as A(Annual);

(ii) the CENVAT credit attributable to inputs and input services used exclusively in or in relation to the manufacture of non-exempted goods removed or for the provision of non-exempted services on the basis of inputs and input services actually so used shall be called Annual eligible credit and denoted as B(Annual);

(iii) common credit left for further attribution shall be denoted as C(Annual) and calculated as, –

C(Annual) = T(Annual) – [A(Annual) + B(Annual)];

(iv) common credit attributable towards exempted goods removed or for provision of exempted services shall be called Annual ineligible common credit, denoted by D(Annual) and shall be calculated as, –

D(Annual) = (H/I) x C(Annual);

where H is sum total of-

(a)value of exempted services provided; and

(b) value of exempted goods removed;

during the financial year ;

where I is sum total of –

(a) value of non-exempted services provided,

(b) value of exempted services provided,

(c) value of non-exempted goods removed; and

(d) value of exempted goods removed;

during the financial year;

(d) the manufacturer or the provider of output service shall pay on or before the 30th June of the succeeding financial year, an amount equal to difference between the total of the amount of Annual ineligible credit and Annual ineligible common credit and the aggregate amount of ineligible credit and ineligible common credit for the period of whole year, namely, [{A(Annual) + D(Annual)} – {(A+D) aggregated for the whole year)}], where the former of the two amounts is greater than the later;

(e) where the amount under clause (d) is not paid by the 30th June of the succeeding financial year, the manufacturer of goods or the provider of output service, shall, in addition to the amount of credit so paid under clause (d), be liable to pay on such amount an interest at the rate of fifteen per cent. per annum, from the 30th June of the succeeding financial year till the date of payment of such amount;

(f) the manufacturer or the provider of output service, shall at the end of the financial year, take credit of amount equal to difference between the total of the amount of the aggregate of ineligible credit and ineligible common credit paid during the whole year and the total of the amount of annual ineligible credit and annual ineligible common credit, namely, [{(A+D) aggregated for the whole year)} – {A(Annual) + D(Annual)}], where the former of the two amounts is greater than the later;

(g) the manufacturer of the goods or the provider of output service shall intimate to the jurisdictional Superintendent of Central Excise, within a period of fifteen days from the date of payment or adjustment, as per the provisions of clauses (d), (e) and (f) , the following particulars, namely :-

(i) details of credit attributed towards eligible credit, ineligible credit, eligible common credit and ineligible common credit, month-wise, for the whole financial year, determined as per the provisions of clause (b);

(ii) CENVAT credit annually attributed to eligible credit, ineligible credit, eligible common credit and ineligible common credit for the whole of financial year, determined as per the provisions of clause (c);

(iii) amount determined and paid as per the provisions of clause (d), if any, with the date of payment of the amount;

(iv) interest payable and paid, if any, determined as per the provisions of clause (e); and

(v) credit determined and taken as per the provisions of clause (f), if any, with the date of taking the credit.]

45[(3AA) Where a manufacturer or a provider of output service has failed to exercise the option under sub-rule (3) and follow the procedure provided under sub-rule (3A), the Central Excise Officer competent to adjudicate a case based on amount of CENVAT credit involved, may allow such manufacturer or provider of output service to follow the procedure and pay the amount referred to in clause (ii) of sub-rule (3), calculated for each of the months, mutatis-mutandis in terms of clause (c) of sub-rule (3A), with interest calculated at the rate of fifteen per cent. per annum from the due date for payment of amount for each of the month, till the date of payment thereof.

(3AB) Assessee who has opted to pay an amount under clause (ii) or clause (iii) of sub-rule (3) in the financial year 2015-16, shall pay the amount along with interest or take credit for the said financial year in terms of clauses ( c), (d), (e), (f), (g), (h) or (i) of sub-rule (3A), as they prevail on the day of publication of this notification and for this purpose these provisions shall be deemed to be in existence till the 30th June, 2016.]

18[****]

46(3B) A banking company and a financial institution including a non-banking financial company, engaged in providing services by way of extending deposits, loans or advances, in addition to options given in sub-rules (1), (2) and (3), shall have the option to pay for every month an amount equal to fifty per cent. of the CENVAT credit availed on inputs and input services in that month.]

25[****]

(3D) Payment of an amount under sub-rule (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.

35[Explanation I. – “Value” for the purpose of sub-rules (3) and (3A),-

(a) shall have the same meaning as assigned to it under section 67 of the Finance Act, read with rules made thereunder or, as the case may be, the value determined under section 3, 4 or 4A of the Excise Act, read with rules made thereunder;

(b) in the case of a taxable service, when the option available under sub-rules  (7),(7A),(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 undersection 66B  of the Finance 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; or

(c) in case of trading, 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.

(d) in case of trading of securities, shall be the difference between the sale price and the purchase price of the securities traded  or one per cent. of the purchase price of the securities traded, whichever is more.

(e) shall not include the value of services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount];

Explanation II. – The amount mentioned in sub-rules (3), (3A) 27[and (3B)] unless specified otherwise, shall be paid by the manufacturer of goods or the provider of output service by debiting the CENVAT credit or otherwise on or before the 5th day of the following month except for the month of March, when such payment shall be made on or before the 31st day of the month of March.

Explanation III. – If the manufacturer of goods or the provider of output service fails to pay the amount payable under sub-rule (3), (3A), 27[and (3B)], it shall be recovered, in the manner as provided in rule 14, for recovery of CENVAT credit wrongly taken.

Explanation IV.- In case of a manufacturer who avails the exemption under a notification based on the value of clearances in a financial year and a service provider who is an individual or proprietary firm or partnership firm, the expressions, “following month” and “month of March” occurring in sub-rules (3) and (3A) shall be read respectively as “following quarter” and “quarter ending with the month of March.]

47[(4) No CENVAT credit shall be allowed on capital goods used exclusively in the manufacture of exempted goods or in providing exempted services for a period of two years from the date of commencement of the commercial production or provision of services, as the case may be, other than the final products or output services which are exempt from the whole of the duty of excise leviable thereon under any notification where exemption is granted based upon the value or quantity of clearances made or services provided in a financial year:

Provided that where capital goods are received after the date of commencement of commercial production or provision of services, as the case may be, the period of two years shall be computed from the date of installation of such capital goods.]

20[****]

 (6) The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case the excisable goods removed without payment of duty are either-

6[(i) cleared to a unit in a special economic zone or to a developer of a special economic zone for their authorized operations; or]

(ii) cleared to a hundred per cent. export-oriented undertaking; or

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

(iv) supplied to the United Nations or an international organization for their official use or supplied to projects funded by them, on which exemption of duty is available under notification of the Government of India in the Ministry of Finance (Department of Revenue) No.108/95-Central Excise, dated the 28th August, 1995, number G. S R. 602 (E), dated the 28th August, 1995; or

9[(iva) supplied for the use of foreign diplomatic missions or consular missions or career consular offices or diplomatic agents in terms of the provisions of 28[12/2012-Central Excise, dated the 17th March, 2012, number G.S.R. 163(E), dated the 17th March, 2012] or]

(v) cleared for export under bond in terms of the provisions of the Central Excise Rules, 2002; or

(vi) gold or silver falling within Chapter 71 of the said First Schedule, arising in the course of manufacture of copper or zinc by smelting; or.

8[(vii) all goods which are exempt from the duties of customs leviable under the First Schedule to theCustoms Tariff Act, 1975 (51 of 1975) and the additional duty leviable under sub-section (1) of section 3 of the said Customs Tariff Act when imported into India and are supplied,-

(a) against International Competitive Bidding; or

(b) to a power project from which power supply has been tied up through tariff based competitive bidding; or

(c) to a power project awarded to a developer through tariff based competitive bidding, in terms of29[12/2012-Central Excise, dated the 17th March, 2012]]

30[(viii) supplies made for setting up of solar power generation projects or facilities]

40[(ix) Ethanol produced from molasses generated from cane crushed in the sugar season 2015-16 i.e. 1st October, 2015 onwards, for supply to the public sector oil marketing companies, namely, Indian Oil Corporation Ltd., Hindustan Petroleum Corporation Ltd. or Bharat Petroleum Corporation Ltd., for the purposes of blending with petrol, in terms of the provisions of S.No.40A of the Table in notification No.12/2012-Central Excise, dated the 17th March, 2012, number G.S.R. 163(E), dated that 17th March, 2012. ]

21[(6A) The provisions of sub-rules (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 Special Economic Zone or to a Developer of a Special Economic Zone for their authorised operation.]

32[(7) The provisions of sub-rules (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 Special Economic Zone or to a developer of a Special Economic Zone for their authorised operations or when a service is exported, 48[or when a service is provided or agreed to be provided by way of transportation of goods by a vessel from customs station of clearance in India to a place outside India]

(8) For the purpose of this rule, a service provided or agreed to be provided shall not be an exempted service when:-

(a) the service satisfies the conditions specified under rule 6A of the Service Tax Rules, 1994 and the payment for the service is to be received in convertible foreign currency; and

(b) such payment has not been received for a period of six months or such extended period as maybe allowed from time-to-time by the Reserve Bank of India, from the date of provision.]

36Provided that if such payment is received after the specified or extended period allowed by the Reserve Bank of India but within one year from such period, the service provider shall be entitled to take the credit of the amount equivalent to the CENVAT credit paid earlier in terms of sub rule (3) to the extent it relates to such payment, on the basis of documentary evidence of the payment so received.]

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 Notes:-

1.

In item (i), of clause (a) of sub rule (3) of  for the words and figures “heading No.22.04”, the word and figures “heading 2207” has been substituted vide notification no. 7/2007 CE(NT) dated 21-2-2007

2.

In item (v) of clause (a) of sub rule (3), for the words and figures “newsprint, in rolls or sheets, falling within heading No. 48.01”, the words and figures “newsprint, in rolls, sheets or reels, falling within Chapter 48” has been substituted vide notification no. 7/2007 CE(NT) dated 21-2-2007

3.

After Explanation II, Explanation III has been inserted with effect from the 1st day of April, 2007, namely:-vide Notification No. 10/2007 CE (NT) dated 1/3/2007)

4.

in sub-rule (1) for the words, “exempted goods or exempted services”, the words, “exempted goods or for provision of exempted services” has been substituted vide notification no. 10/2008 dated 1-3-2008 with effect from 1-4-2008

5. Sub-rule (3) has been substituted (and 3A has been inserted) with effect from 1-4-2008 vide notification no. 10/2008 CE(NT) dated 1-3-2008, before substitution it was read as under:

(3) Notwithstanding anything contained in sub-rules (1) and (2), the manufacturer or the provider of output service, opting not to maintain separate accounts, shall follow either of the following conditions, as applicable to him, namely:-

(a) if the exempted goods are-

[1] (i) goods falling within heading 2207 of the First Schedule to the Excise Tariff Act (hereinafter in this rule referred to as the said First Schedule);

(ii) Low Sulphur Heavy Stock (LSHS) falling within Chapter 27 of the said First Schedule used in the generation of electricity;

(iii) Naphtha (RN) falling within Chapter 27 of the said First Schedule used in the manufacture of fertilizer;

(iv) Naptha (RN) and furnace oil falling within Chapter 27 of the said First Schedule used for generation of electricity;

[2] (v) newsprint, in rolls, sheets or reels, falling within Chapter 48 of the said First Schedule;

(vi) final products falling within Chapters 50 to 63 of the said First Schedule,

(vii) goods supplied to defence personnel or for defence projects or to the Ministry of Defence for official purposes, under any of the following notifications of the Government of India in the Ministry of Finance (Department of Revenue), namely:-

(1) No. 70/92-Central Excise, dated the 17th June, 1992, G.S.R. 595 (E), dated the 17th June, 1992;

(2) No. 62/95-Central Excise, dated the 16th March, 1995, G.S.R. 254 (E), dated the 16th March, 1995;

(3) No. 63/95-Central Excise, dated the 16th March, 1995, G.S.R. 255 (E), dated the 16th March, 1995;

(4) No. 64/95-Central Excise, dated the 16th March, 1995, G.S.R. 256 (E), dated the 16th March, 1995,

the manufacturer shall pay an amount equivalent to the CENVAT credit attributable to inputs and input services used in, or in relation to, the manufacture of such final products at the time of their clearance from the factory; or

(viii) Liquefied Petroleum Gases (LPG) falling under tariff items 2711 12 00, 2711 13 00 and 2711 19 00 of the said First Schedule[A4] ;

(ix) Kerosene falling within heading 2710 of the said First Schedule, for ultimate sale through public distribution system.

(b) if the exempted goods are other than those described in condition (a), the manufacturer shall pay an amount equal to ten 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;

(c) the provider of output service shall utilize credit only to extent of an amount not exceeding twenty per cent. of the amount of service tax payable on taxable output service.

Explanation I.- The amount mentioned in conditions (a) and (b) shall be paid by the manufacturer or provider of output service by debiting the CENVAT credit or otherwise.

Explanation II.- If the manufacturer or provider of output service fails to pay the said amount, it shall be recovered along with interest in the same manner, as provided in rule 14, for recovery of CENVAT credit wrongly taken.

(d) notwithstanding anything contained in condition (c), the provider of output service referred to in sub-clause  (d) of clause  (105) of section  65 of the Finance Act has the option to utilise CENVAT credit attributable to inputs and input services used in providing taxable services subject to the following, namely:-

(i) while exercising the option under this condition, the provider of output service shall intimate  his  option  in  writing  to  the  Superintendent  of  Central  Excise  giving  the following particulars, namely:-

(a) name and address of the provider of output service;

(b) date from which the option under this clause is exercised or proposed to be exercised;

(c) description of taxable services;

(d) description of exempted services;

(e) CENVAT credit of inputs and input services lying in balance as on the date of exercising the option under this condition;

(ii) the option given under part (i) for a financial year shall not be withdrawn during the remaining part of the financial year;

(iii) the provider of output service shall,-

(a)  determine,  provisionally,  the  amount  equivalent  to  CENVAT  credit attributable to exempted services, in the following manner, namely:-

CENVAT credit attributable to exempted services (provisional) = (A/B) multiplied by C, where A denotes total value of exempted services provided during  the  preceding  financial  year,  B  denotes  total  value  of  taxable  and exempted services provided during the preceding financial year, and C denotes total CENVAT credit of inputs and input services taken during the month;

(b) pay the amount attributable to exempted services determined as above for each month, on or before 5th day of the following month;

(c) determine the CENVAT credit attributable to exempted services for the whole financial year in the following manner, namely:-

CENVAT credit attributable to exempted services = (X/Y) multiplied by Z,  where X denotes total  value  of  exempted  services  provided  during  the financial year, Y denotes total value of taxable and exempted services provided during the financial year, and Z denotes total CENVAT credit of inputs and input services taken during the financial year;

(d) pay an amount equal to the difference between the amount determined as per item (c) and the amount determined as per item (a), on or before the 30th June of the succeeding financial year, where the amount determined as per item (c) is more than the amount paid;

(e) in addition to the amount short-paid, be liable to pay interest at the rate of twenty-four per cent. per annum from the due date i.e. 30th June till the date of payment, where the amount short-paid is not paid within the said due date;

(f)  where  the  amount  determined  as  per  item (c)  is  less  than  the  amount determined and paid as per item (a), adjust the excess amount on his own, by taking credit of such amount;

(iv) the provider of output service shall intimate to the jurisdictional Superintendent of Central  Excise,  within  a  period of  fifteen  days  from the  date  of  such  payment or adjustment, the following particulars, namely:-

(a) details of CENVAT credit attributable to exempted services, monthwise, for the  whole financial year, determined provisionally as per part (iii) item (a),

(b) the amount equivalent to CENVAT credit attributable to exempted services,  determined  provisionally  for  each  month  and  paid  monthwise  as  per  part (iii)item(b),

(c) CENVAT credit attributable to exempted services for the whole financial year as determined as per part (iii) item (c),

(d) amount short paid determined as per part (iii) item (d), alongwith the date of  payment of the amount short paid,

(e) interest payable and paid, if any, on the amount short paid, determined as per part (iii) item (e), and

(f)  credit  taken  on  account  of  excess  payment,  if  any,  determined  as  per  part (iii)item(f);

(v) where the amount equivalent to CENVAT credit attributable to exempted services can not be determined provisionally since no taxable service referred to in sub-clause (d) of clause (105) of section 65 of the Finance Act has been provided, the provider of output service is not required to determine, provisionally, and pay CENVAT credit attributable to  exempted  services  for  each  month  but  he  shall  determine  the  CENVAT credit attributable to exempted services for the whole year as prescribed in part (iii) item (c) and pay the amount so calculated on or before 30th June of the succeeding financial year.

(vi) where the amount determined under part (v) is not paid within the said due date i.e. the 30th June, the provider of output service shall, in addition to the said amount, be liable to pay interest at the rate of twenty four per cent. per annum from the due date till the date of payment.

[3] Explanation III .- For the removal of doubts, it is hereby clarified that the credit shall not be allowed on inputs and inputs services used exclusively for the manufacture of exempted goods or exempted services.

6. Substituted vide notification no. 50/2008 CE(NT) dated 31-12-2008, prior to substitution it was read as:

“(i) cleared to a unit in a special economic zone; or “

7. Substituted vide notification no. 16/2009 CE(NT) dated 7-7-2009, prior to substitution it was read as:

[(i)   the manufacturer of goods shall pay an amount equal to ten per cent. of value of the exempted goods and the provider of output service shall pay an amount equal to eight per cent. of value of the exempted services; or]

8. Substituted vide notification no. 6/2010 CE(NT) dated 27-2-2010 w.e.f. 27-2-2010, before it was read as, “(vii) all goods which are exempt from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable under section 3 of the said Customs Tariff Act when imported into India and supplied against International Competitive Bidding in terms of notification No. 6/2002-Central Excise dated the 1st March, 2002 or notification No. 6/2006-Central Excise dated the 1stMarch, 2006, as the case may be.”
9. Inserted, vide Notification No. 27/2010-Central Excise (N.T.), dated 01.07.2010
10 Substituted vide notification no. 3/2011 CE(NT) dated 1.3.2011 w.e.f. 1.4.2011, before it was read as, “Obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services.”
11. Substituted vide notification no. 3/2011 CE(NT) dated 1.3.2011 w.e.f. 1.4.2011, before it was read as, “input or input service which is used in the manufacture of [4] [exempted goods or for provision of exempted services], “
12. Substituted vide notification no. 3/2011 CE(NT) dated 1.3.2011 w.e.f. 1.4.2011, before it was read as,

“(2) Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services, except inputs intended to be used as fuel, and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for receipt, consumption and inventory of input and input service meant for use in the manufacture of dutiable final products or in providing output service and the quantity of input meant for use in the manufacture of exempted goods or services and take CENVAT credit only on that quantity of input or input service which is intended for use in the manufacture of dutiable goods or in providing output service on which service tax is payable.”

13. Substituted vide notification no. 3/2011 CE(NT) dated 1.3.2011 w.e.f. 1.4.2011, before it was read as, “either”
14. Substituted vide notification no. 3/2011 CE(NT) dated 1.3.2011 w.e.f. 1.4.2011, before it was read as,

“ 7[(i) the manufacturer of goods shall pay an amount equal to five per cent. of value of the exempted goods and the provider of output service shall pay an amount equal to six per cent. of value of the exempted services; or]

(ii)  the manufacturer of goods or the provider of output service shall pay an amount equivalent to the CENVAT credit attributable to inputs and input services used in, or in relation to, the manufacture of exempted goods or for provision of exempted services subject to the conditions and procedure specified in sub-rule (3A).”

15. Substituted vide notification no. 3/2011 CE(NT) dated 1.3.2011 w.e.f. 1.4.2011, before it was read as,

“Explanation II.-For removal of doubt, it is hereby clarified that the credit shall not be allowed on inputs and input services used exclusively for the manufacture of exempted goods or provision of exempted service.”

16. Inserted vide notification no. 3/2011 CE(NT) dated 1.3.2011 w.e.f. 1.4.2011
17 Inserted vide notification no. 3/2011 CE(NT) dated 1.3.2011 w.e.f. 1.4.2011
18. Omitted vide notification no. 3/2011 CE(NT) dated 1.3.2011 w.e.f. 1.4.2011, before it was read as,

“ Explanation I.- “Value” for the purpose of sub-rules (3) and (3A) shall have the same meaning assigned to it under section 67 of the Finance Act, 1994 read with rules made thereunder or, as the case may be, the value determined under section 4 or 4A of the Central Excise Act, 1944 read with rules made thereunder.

Explanation II.-The amount mentioned in sub-rules (3) and (3A), unless specified otherwise, shall be paid by the manufacturer of goods or the provider of output service by debiting the CENVAT credit or otherwise on or before the 5th day of the following month except for the month of March, when such payment shall be made on or before the 31st day of the month of March.

Explanation III.- If the manufacturer of goods or the provider of output service fails to pay the amount payable under sub-rule (3) or as the case may be sub-rule (3A), it shall be recovered, in the manner as provided in rule 14, for recovery of CENVAT credit wrongly taken.”

19. Inserted vide notification no. 3/2011 CE(NT) dated 1.3.2011 w.e.f. 1.4.2011
20. Omitted vide notification no. 3/2011 CE(NT) dated 1.3.2011 w.e.f. 1.4.2011, before it was read as,

(5) Notwithstanding anything contained in sub-rules (1), (2) and (3), credit of the whole of service tax paid on taxable service as specified in sub-clause (g), (p), (q), (r), (v), (w), (za), (zm), (zp), (zy), (zzd), (zzg), (zzh), (zzi), (zzk), (zzq) and (zzr) of clause (105) of section 65 of the Finance Act shall be allowed unless such service is used exclusively in or in relation to the manufacture of exempted goods or providing exempted services.

21. Inserted vide notification no. 3/2011 CE(NT) dated 1.3.2011 w.e.f. 1.4.2011
22. Substituted vide notification no. 13/2011 CE(NT) dated 31.3.2011 w.e.f. 1.4.2011, before it was read as, “shall be the difference between the sale price and the purchase price of the goods traded”
23. Substituted vide notification no. 18/2012 CE(NT) dated 17-3-2012, w.e.f. 1-4-2012, before it was read as, “five per cent.”
24. Substituted vide notification no. 18/2012 CE(NT) dated 17-3-2012, w.e.f. 1-4-2012, before it was read as, “five per cent.”
25. Omitted vide notification no. 18/2012 CE(NT) dated 17-3-2012, w.e.f. 1-4-2012, before it was read as, “(3C) Notwithstanding anything contained in sub-rules (1), (2), (3) and (3B), a provider of output service providing taxable services as specified in sub-clauses (zx) and (zzzzf) of clause (105) of section 65 of the Finance Act, shall pay for every month an amount equal to twenty per cent. of the CENVAT credit availed on inputs and input services in that month.”
26. Inserted vide notification no. 18/2012 CE(NT) dated 17-3-2012, w.e.f. 1-4-2012
27. Substituted vide notification no. 18/2012 CE(NT) dated 17-3-2012, w.e.f. 1-4-2012, before it was read as, “(3B) and (3C),”
28. Substituted vide Notification No. 25/2012-Central Excise (N.T), Dated 08/05/2012, before it was read as:- “notification No. 6/2006 – Central Excise dated the 1st March, 2006, number G.S.R. 96(E), dated the 1st March, 2006
29. Substituted vide Notification No. 25/2012-Central Excise (N.T), Dated 08/05/2012, before it was read as:- “notification No. 6/2006-Central Excise, dated the 1st March, 2006.”
30. Inserted vide Notification No. 25/2012-Central Excise (N.T), Dated 08/05/2012
31. Substituted vide Notification No.28/2012-Central Excise (N.T), Dated 20/06/2012, before it was read as:- “provider of taxable service”
32. Inserted vide Notification No.28/2012-Central Excise (N.T), Dated 20/06/2012,
33. Substituted vide Notification No.28/2012-Central Excise (N.T), Dated 20/06/2012, before it was read as; in sub-rule (3A), in clauses (a), (b), (c) and (h), for the words “taxable” wherever they occur
34. Substituted vide Notification No.28/2012-Central Excise (N.T), Dated 20/06/2012, before it was read as; “providing taxable service specified in sub-clause (zm) of clause (105) of section 65 of the Finance Act”
35. Substituted vide Notification No.28/2012-Central Excise (N.T), Dated 20/06/2012, before it was read as; -“Explanation I. – “Value” for the purpose of sub-rules (3) and (3A),-

(a) shall have the same meaning as assigned to it under section 67 of the Finance Act, read with rules made there under or, as the case may be, the value determined under section 34 or4A of the Excise Act, read with rules made thereunder.

(b) in the case of a taxable service, when the option available under sub-rules (7), 26[(7A)], (7B) or (7C) of rule 6 of the Service Tax Rules, 1994, or the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007 has been availed, shall be the value on which the rate of service tax under section 66 of the Finance 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; or

(c) in case of trading, 22[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”.].

36. Inserted vide Notification No. 21/2014-Central Excise (N.T.) dated 11th July, 2014 w.e.f. 11th day of July, 2014.
37. Inserted vide Not. 06/2015 – Dated 1-3-2015 w.e.f. 1st day of March, 2015
38. Inserted vide Not. 14/2015 – Dated 19-5-201 w.e.f. 1st of June, 2015
39. Substituted vide Not. 14/2015 – Dated 19-5-201, w.e.f. 1st of June, 2015, before it was read as, 24[six per cent.]
40. Inserted vide Not. 21/2015 – Dated 7-10-2015.
41. Substituted vide Not. 13/2016 – Dated 1-3-2016,  w.e.f. 1st April, 2016, before it was read as,

“(1) The CENVAT credit shall not be allowed on such quantity of 11[input used in or in relation to the manufacture of exempted goods or for provision of exempted services, or input service used in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provision of exempted services] except in the circumstances mentioned in sub-rule (2).

Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule.

37[ Explanation 1. – For the purposes of this rule, exempted goods or final products as defined in clauses (d) and (h) of rule 2 shall include non-excisable goods cleared for a consideration from the factory.

Explanation 2. – Value of non-excisable goods for the purposes of this rule, shall be the invoice value and where such invoice value is not available, such value shall be determined by using reasonable means consistent with the principles of valuation contained in the Excise Act and the rules made thereunder.]”

 

42. Substituted vide Not. 13/2016 – Dated 1-3-2016,  w.e.f. 1st April, 2016, before it was read as,

12[(2) Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for-

(a) the receipt, consumption and inventory of inputs used-

(i) in or in relation to the manufacture of exempted goods;

(ii) in or in relation to the manufacture of dutiable final products excluding exempted goods;

(iii) for the provision of exempted services;

(iv) for the provision of output services excluding exempted services; and

(b) the receipt and use of input services-

(i) in or in relation to the manufacture of exempted goods and their clearance upto the place of removal;

(ii) in or in relation to the manufacture of dutiable final products, excluding exempted goods, and their clearance upto the place of removal;

(iii) for the provision of exempted services; and

(iv) for the provision of output services excluding exempted services, and shall take CENVAT credit only on inputs under sub-clauses (ii) and (iv) of clause (a) and input services under sub-clauses (ii) and (iv) of clause (b).]”

43. Substituted vide Not. 13/2016 – Dated 1-3-2016,  w.e.f. 1st April, 2016, before it was read as,

 [5](3) Notwithstanding anything contained in sub-rules (1) and (2), the manufacturer of goods or the provider of output service, opting not to maintain separate accounts, shall follow 13[any one] of the following options, as applicable to him, namely:-

14 [(i) pay an amount equal to 23[six per cent.] of value of the exempted goods and 38[seven per cent. of value of the] exempted services; or

(ii) pay an amount as determined under sub-rule (3A); or

(iii) maintain separate accounts for the receipt, consumption and inventory of inputs as provided for in clause (a) of sub-rule (2), take CENVAT credit only on inputs under subclauses (ii) and (iv) of said clause (a) and pay an amount as determined under sub-rule (3A) in respect of input services. The provisions of sub-clauses (i) and (ii) of clause (b) and subclauses (i) and (ii) of clause (c) of sub-rule (3A) shall not apply for such payment:

Provided that if any duty of excise is paid on the exempted goods, the same shall be reduced from the amount payable under clause (i):

Provided further that 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 specified in clause (i) shall be 39[seven] of the value so exempted.”;

32[Provided that in case of transportation of goods or passengers by rail the amount required to be paid under clause (i) shall be an amount equal to 2 per cent. of value of the exempted services.]

Explanation I.- If the manufacturer of goods or the provider of output service, avails any of the option under this sub-rule, he shall exercise such option for all exempted goods manufactured by him or, as the case may be, all exempted services provided by him, and such option shall not be withdrawn during the remaining part of the financial year.

15 [Explanation II.- For removal of doubt, it is hereby clarified that the 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 upto the place of removal or for provision of exempted services.

Explanation III. – No CENVAT credit shall be taken on the duty or tax paid on any goods and services that are not inputs or input services.]”

44. Substituted vide Not. 13/2016 – Dated 1-3-2016,  w.e.f. 1st April, 2016, before it was read as,

“(3A) For determination and payment of amount payable under clause (ii) of sub-rule (3), the manufacturer of goods or the provider of output service shall follow the following procedure and conditions, namely:-

(a)  while exercising this option, the manufacturer of goods or the provider of output service shall intimate in writing to the Superintendent of Central Excise giving the following particulars, namely:-

(i)   name, address and registration No. of the manufacturer of goods or provider of output service;

(ii)  date from which the option under this clause is exercised or proposed to be exercised;

(iii) description of dutiable goods or 33[output] services;

(iv) description of exempted goods or exempted services;

(v)  CENVAT credit of inputs and input services lying in balance as on the date of exercising the option under this condition;

(b)  the manufacturer of goods or the provider of output service shall, determine and pay, provisionally, for every month,-

(i)   the amount equivalent to CENVAT credit attributable to inputs used in or in relation to manufacture of exempted goods, denoted as A;

(ii)  the amount of CENVAT credit attributable to inputs used for provision of exempted services (provisional)= (B/C) multiplied by D, where B denotes the total value of exempted services provided during the preceding financial year, C denotes the total value of dutiable goods manufactured and removed plus the total value of 33[output] services provided plus the total value of exempted services provided, during the preceding financial year and D denotes total CENVAT credit taken on inputs during the month minus A;

(iii) the amount attributable to input services used in or in relation to manufacture of exempted goods 16[and their clearance up to the place of removal] or provision of exempted services (provisional) = (E/F) multiplied by G, where E denotes total value of exempted services provided plus the total value of exempted goods manufactured and removed during the preceding financial year, F denotes total value of taxable and exempted services provided, and total value of dutiable and exempted goods manufactured and removed, during the preceding financial year, and G denotes total CENVAT credit taken on input services during the month;

(c)  the manufacturer of goods or the provider of output service, shall determine finally the amount of CENVAT credit attributable to exempted goods and exempted services for the whole financial year in the following manner, namely:-

(i)   the amount of CENVAT credit attributable to inputs used in or in relation to manufacture of exempted goods, on the basis of total quantity of inputs used in or in relation to manufacture of said exempted goods, denoted as H;

(ii)  the amount of CENVAT credit attributable to inputs used for provision of exempted services = (J/K) multiplied by L, where J denotes the total value of exempted services provided during the financial year, K denotes the total value of dutiable goods manufactured and removed plus the total value of 33[output]services provided plus the total value of exempted services provided, during the financial year and L denotes total CENVAT credit taken on inputs during the financial year minus H;

(iii) the amount attributable to input services used in or in relation to manufacture of exempted goods 17[and their clearance up to the place of removal] or provision of exempted services = (M/N) multiplied by P, where M denotes total value of exempted services provided plus the total value of exempted goods manufactured and removed during the financial year, N denotes total value of 33[output] and exempted services provided, and total value of dutiable and exempted goods manufactured and removed, during the financial year, and P denotes total CENVAT credit taken on input services during the financial year;

(d)  the manufacturer of goods or the provider of output service, shall pay an amount equal to the difference between the aggregate amount determined as per condition (c) and the aggregate amount determined and paid as per condition (b), on or before the 30th June of the succeeding financial year, where the amount determined as per condition (c) is more than the amount paid;

(e)  the manufacturer of goods or the provider of output service, shall, in addition to the amount short-paid, be liable to pay interest at the rate of twenty-four per cent. per annum from the due date, i.e., 30th June till the date of payment, where the amount short-paid is not  the said due date;

where the amount determined as per condition (c) is less than the amount determined and paid as per condition (b), the said manufacturer of goods or the provider of output service may adjust the excess amount on his own, by taking credit of such amount;

(g)  the manufacturer of goods or the provider of output service shall intimate to the jurisdictional Superintendent of Central Excise, within a period of fifteen days from the date of payment or adjustment, as per condition (d) and (f) respectively, the following particulars, namely:-

(i)   details of CENVAT credit attributable to exempted goods and exempted services, monthwise, for the whole financial year, determined provisionally as per condition (b),

(ii)  CENVAT credit attributable to exempted goods and exempted services for the whole financial year, determined as per condition (c)

(iii) amount short paid determined as per condition (d), alongwith the date of payment of the amount short-paid,

(iv) interest payable and paid, if any, on the amount short-paid, determined as per condition (e), and

(v)  credit taken on account of excess payment, if any, determined as per condition (f);

(h)  where the amount equivalent to CENVAT credit attributable to exempted goods or exempted services cannot be determined provisionally, as prescribed in condition (b), due to reasons that no dutiable goods were manufactured and no 33[output] service was provided in the preceding financial year, then the manufacturer of goods or the provider of output service is not required to determine and pay such amount provisionally for each month, but shall determine the CENVAT credit attributable to exempted goods or exempted services for the whole year as prescribed in condition (c) and pay the amount so calculated on or before 30th June of the succeeding financial year.

(i)   where the amount determined under condition (h) is not paid within the said due date, i.e., the 30thJune, the manufacturer of goods or the provider of output service shall, in addition to the said amount, be liable to pay interest at the rate of twenty four per cent. per annum from the due date till the date of payment. ”

45. Inserted vide Not. 13/2016 – Dated 1-3-2016,  w.e.f. 1st April, 2016.
46. Substituted vide Not. 13/2016 – Dated 1-3-2016,  w.e.f. 1st April, 2016, before it was read as,

19[(3B) Notwithstanding anything contained in sub-rules (1), (2) and (3), a banking company and a financial institution including a non-banking financial company, 34[engaged in providing services by way of extending deposits, loans or advances], shall pay for every month an amount equal to fifty per cent. of the CENVAT credit availed on inputs and input services in that month.”

47. Substituted vide Not. 13/2016 – Dated 1-3-2016,  w.e.f. 1st April, 2016, before it was read as,

“(4) No CENVAT credit shall be allowed on capital goods which are used exclusively in the manufacture of exempted goods or in providing exempted services, other than the final products which are exempt from the whole of the duty of excise leviable thereon under any notification where exemption is granted based upon the value or quantity of clearances made in a financial year.”

48. Inserted vide Not. 13/2016 – Dated 1-3-2016,  w.e.f. 1st March, 2016
49.

 Substituted vide Not. 23/2016 – Dated 1-4-2016,  before it was read as, ” (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 total credit available in the account of the assessee at the end of the period to which the payment relates; or “