CENVAT CREDIT RULES, 2004

[Notification No. 23/2004-C.E. (N.T.) dated 10.09.2004 as amended by

24/2004-C.E. (N.T.) dated 17.09.2004, 38/2004-C.E. (N.T.) dated 25.11.2004,
03/2005-C.E. (N.T.) dated 28.01.2005, 13/2005-C.E. (N.T.) dated 01.03.2005,
22/2005-C.E. (N.T.) dated 13.05.2005, 27/2005-C.E. (N.T.) dated 16.05.2005,
28/2005-C.E. (N.T.) dated 07.06.2005, 06/2006-C.E. (N.T.) dated 20.03.2006,
08/2006-C.E. (N.T.) dated 19.04.2006, 10/2006-C.E. (N.T.) dated 25.04.2006,
19/2006-C.E. (N.T.) dated 30.09.2006, 31/2006-C.E. (N.T.) dated 30.12.2006,
07/2007-C.E.(N.T.) dated 21.02.2007, 10/2007-C.E.(N.T.) dated 01.03.2007,
19/2007-C.E.(N.T.) dated 09.03.2007, 24/2007-C.E.(N.T.) dated 25.04.2007,
27/2007-C.E.(N.T.) dated 12.05.2007, 32/2007-C.E.(N.T.) dated 03.08.2007,
33/2007-C.E.(N.T.) dated 07.09.2007, 35/2007-C.E.(N.T.) dated 14.09.2007,
10/2008-C.E. (N.T.) dated 01.03.2008, 35/2008-C.E. (N.T.) dated 24.09.2008,
48/2008-C.E. (N.T.) dated 05.12.2008, 50/2008-C.E. (N.T.) dated 31.12.2008,
16/2009-C.E. (N.T.) dated 07.07.2009, 22/2009-C.E. (N.T.) dated 07.09.2009,
and 6/2010-C.E. (N.T.) dated 27.02.2010]

In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 (1 of 1944) and section 94 of
the Finance Act, 1994 (32 of 1994) and in supersession of the CENVAT Credit Rules, 2002 and the Service Tax
Credit Rules, 2002, except as respects things done or omitted to be done before such supersession, the Central
Government hereby makes the following rules, namely:-

Rule 1. Short title, extent and commencement ---(1) These rules may be called the CENVAT Credit
(Amendment) Rules, 2010.
(2) They shall come into force on the date of their publication in the Official Gazette.

Rule 2. Definitions. - In these rules, unless the context otherwise requires,-

(a) "capital goods" means:-

(A) the following goods, namely:-

(i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading No.
68.05 grinding wheels and the like, and parts thereof falling under heading 6804 of the
First Schedule to the Excise Tariff Act;
(ii) pollution control equipment;
(iii) components, spares and accessories of the goods specified at (i) and (ii);
(iv) moulds and dies, jigs and fixtures;
(v) refractories and refractory materials;
(vi) tubes and pipes and fittings thereof; and
(vii) storage tank, used-
(1) in the factory of the manufacturer of the final products, but does not include any
equipment or
appliance used in an office; or
(2) for providing output service;
(B) motor vehicle registered in the name of provider of output service for providing taxable
service as specified in sub-clauses (f), (n), (o), (zr), (zzp), (zzt) and (zzw) of clause (105) of
section 65 of the Finance Act;

(b) Customs Tariff Act" means the Customs Tariff Act, 1975 (51 of 1975);
(c) "Excise Act" means the Central Excise Act, 1944 (1 of 1944);
(d) "exempted goods" means excisable 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;
(e) "exempted services" means taxable services which are exempt from the whole of the
 service tax leviable thereon, and includes services on which no service tax is leviable
under section 66 of the Finance Act;
(f) "Excise Tariff Act" means the Central Excise Tariff Act, 1985 (5 of 1986);
(g) "Finance Act" means the Finance Act, 1994 (32 of 1994);
(h) "final products" means excisable goods manufactured or produced from input, or using
input service;
(ij) "first stage dealer" means a dealer, who purchases the goods directly from,-
(i) the manufacturer under the cover of an invoice issued in terms of the provisions
of Central Excise Rules, 2002 or from the depot of the said manufacturer, or from
premises of the consignment agent of the said manufacturer or from any other
premises from where the goods are sold by or on behalf of the said manufacturer,
under cover of an invoice; or
(ii) an importer or from the depot of an importer or from the premises of the
consignment agent of the importer, under cover of an invoice;
(k) "input" means-
(i) 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;
(ii) 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.- Input include goods used in the manufacture of capital goods
which are further used in the factory of the manufacturer; but shall not include
cement, angles, channels, Centrally Twisted Deform bar (CTD) or Thermo
Mechanically Treated bar (TMT) and other items used for construction of factory
shed, building or laying of foundation or making of structures for support of capital
goods;
(l) "input service" means any service,-
(i) used by a provider of taxable service for providing an output service; or
(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the
manufacture of final products and clearance of final products upto the place of
removal,
and includes services used in relation to setting up, modernization, renovation or repairs
of a factory, premises of provider of output service or an office relating to such factory or
premises, advertisement or sales promotion, market research, storage upto the place of
removal, procurement of inputs, activities relating to business, such as accounting,
auditing, financing, recruitment and quality control, coaching and
training, computer networking, credit rating, share registry, and security, inward
transportation of inputs or capital goods and outward transportation upto the place of
removal;
(m) "input service distributor" means an office of the manufacturer or producer of final
products or provider of output service, which receives invoices issued under rule 4A of
 the Service Tax Rules, 1994 towards purchases of input services and issues invoice, bill
or, as the case may be, challan for the purposes of distributing the credit of service tax
paid on the said services to such manufacturer or producer or provider, as the case may
be;

(n) "job work" means processing or working upon of raw material or semi-finished goods
supplied to the job worker, so as to complete a part or whole of the process resulting in
the manufacture or finishing of an article or any operation which is essential for
aforesaid process and the expression "job worker" shall be construed accordingly;
(na) "large taxpayer" shall have the meaning assigned to it in the Central Excise Rules,
2002.
(naa) “manufacturer” or “producer” in relation to articles of jewellery falling under heading 7113
of the First Schedule to the Excise Tariff Act, includes a person who is liable to pay duty
of excise leviable on such goods under sub-rule (1) of rule 12AA of the Central Excise
Rules, 2002;
(o) "notification" means the notification published in the Official Gazette;
(p) "output service" means any taxable service, excluding the taxable service referred to in
sub-clause (zzp) of clause (105) of section 65 of the Finance Act, provided by the
provider of taxable service, to a customer, client, subscriber, policy holder or any other
person, as the case may be, and the expressions ‘provider’ and ‘provided’ shall be
construed accordingly;
(q) "person liable for paying service tax" has the meaning as assigned to it in clause (d) of
sub-rule (1) of rule 2 of the Service Tax Rules, 1994;
(r) "provider of taxable service" include a person liable for paying service tax;
(s) "second stage dealer" means a dealer who purchases the goods from a first stage
dealer;
(t) words and expressions used in these rules and not defined but defined in the Excise Act
or the Finance Act shall have the meanings respectively assigned to them in those
Acts.

Rule 3. CENVAT credit. ---(1) A manufacturer or producer of final products or a provider of taxable
service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of –

(i) the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the
Excise Act;
(ii) the duty of excise specified in the Second Schedule to the Excise Tariff Act, leviable under
the Excise Act;
(iii) the additional duty of excise leviable under section 3 of the Additional Duties of Excise
(Textile and Textile Articles) Act,1978 ( 40 of 1978);
(iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise
(Goods of Special Importance) Act, 1957 ( 58 of 1957);
(v) the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001
(14 of 2001);
(vi) the Education Cess on excisable goods leviable under section 91 read with section 93 of
the Finance (No.2) Act, 2004 (23 of 2004);
(via) the Secondary and Higher Education Cess on excisable goods leviable under section 136
read with section 138 of the Finance Act, 2007 (22 of 2007);
(vii) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty
of excise specified under clauses (i), (ii), (iii), (iv), (v) (vi) and (via);
 (viia) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act,
Provided that a provider of taxable service shall not be eligible to take credit of such additional
duty;
(viii) the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of
2003);
(ix) the service tax leviable under section 66 of the Finance Act;
(x) the Education Cess on taxable services leviable under section 91 read with section 95 of
the Finance (No.2) Act, 2004 (23 of 2004); and
(xa) the Secondary and Higher Education Cess on taxable services leviable under section 136
read with section 140 of the Finance Act, 2007 (22 of 2007); and
(xi) the additional duty of excise leviable under section 85 of Finance Act, 2005 (18 of 2005 )
Provided that the CENVAT credit shall be allowed to be taken of the amount equal to central
excise duty paid on the capital goods at the time of debonding of the unit in terms of the para 8 of
notification No. 22/2003-Central Excise, published in the Gazette of India, part II, Section 3,sub-
section(i),vide number G.S.R. 265(E), dated, the 31st March,2003.
paid on-
(i) any input or capital goods received in the factory of manufacture of final product or
premises of the provider of output service on or after the 10th day of September, 2004; and
(ii) any input service received by the manufacturer of final product or by the provider of output
services
on or after the 10th day of September, 2004,

including the said duties, or tax, or cess paid on any input or input service, as the case may be, used in
the manufacture of intermediate products, by a job-worker availing the benefit of exemption specified in
the notification of the Government of India in the Ministry of Finance (Department of Revenue), No.
214/86- Central Excise, dated the 25th March, 1986, published in the Gazette of India vide number
G.S.R. 547 (E), dated the 25th March, 1986, and received by the manufacturer for use in, or in relation to,
the manufacture of final product, on or after the 10th day of September, 2004.
Explanation.- For the removal of doubts it is clarified that the manufacturer of the final products
and the provider of output service shall be allowed CENVAT credit of additional duty leviable under
section 3 of the Customs Tariff Act on goods falling under heading 9801 of the First Schedule to the
Customs Tariff Act.

(2) Notwithstanding anything contained in sub-rule (1), 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 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.

(3) Notwithstanding anything contained in sub-rule (1), in relation to a service which ceases to be an
exempted service, the provider of the output service shall be allowed to take CENVAT credit of the duty
paid on the inputs received on and after the 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.

(4) The CENVAT credit may be utilized 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 capital 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:

Provided that while paying duty of excise or service tax, as the case may be, the CENVAT credit
shall be utilized only to the extent such credit is available on the last day of the month or quarter, as the
case may be, for payment of duty or tax relating to that month or the quarter, as the case may be:
 Provided further that the CENVAT credit of the duty, or service tax, paid on the inputs, or input
services, used in the manufacture of final products cleared after availing of the exemption under the
following notifications of Government of India in the Ministry of Finance (Department of Revenue),-

(i) No. 32/99-Central Excise, dated the 8th July, 1999 [G.S.R. 508(E), dated 8th July, 1999];
(ii) No. 33/99-Central Excise, dated the 8th July, 1999 [G.S.R. 509(E), dated 8th July, 1999];
(iii) No. 39/2001-Central Excise, dated the 31st July, 2001 [G.S.R. 565 (E), dated the 31st July,
2001];
(iv) No. 56/2002-Central Excise, dated 14th November, 2002 [G.S.R. 764(E), dated the
14th November, 2002];
(v) No. 57/2002-Central Excise, dated 14th November, 2002 [G.S.R.. 765(E), dated the14th
November, 2002];
(vi) No. 56/2003-Central Excise, dated the 25th June, 2003 [G.S.R. 513 (E), dated the 25th
June, 2003]; and
(vii) No. 71/2003-Central Excise, dated the 9th September, 2003 [G.S.R. 717 (E), dated the 9th
Sep, 2003]

shall, respectively, be utilized only for payment of duty on final products, in respect of which exemption
under the said respective notifications is availed of :

Provided also that no credit of the additional duty leviable under sub-section (5) of section 3 of the
Customs Tariff Act, shall be utilized for payment of service tax on any output service:

Provided also that the CENVAT credit of any duty specified in sub-rule (1), except the National
Calamity Contingent duty in item (v) thereof, shall not be utilized for payment of the said National
Calamity Contingent duty on goods falling under tariff items 8517 12 10 and 8517 12 90 respectively of
the First Schedule of the Central Excise Tariff:

Provided also that the CENVAT credit of any duty mentioned in sub-rule (1), other than credit of
additional duty of excise leviable under section 85 of Finance Act, 2005 (18 of 2005 ), shall not
be utilised for payment of said additional duty of excise on final products.

(5) When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from
the factory, or premises of the provider of output service, the manufacturer of the final products or
provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect
of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to
in rule 9:

Provided that such payment shall not be required to be made where any inputs or capital goods are
removed outside the premises of the provider of output service for providing the output service :

Provided further that if the capital goods, on which CENVAT Credit has been taken, are removed
after being used, the manufacturer or provider of output services shall pay an amount equal to the
CENVAT Credit taken on the said capital goods reduced by the percentage points calculated by straight
line method as specified below for each quarter of a year or part thereof from the date of taking the
CENVAT Credit, namely:-

(a) for computers and computer peripherals:

for each quarter in the first year @ 10%

for each quarter in the second year @ 8%
for each quarter in the third year @5%
for each quarter in the fourth and fifth year @1%
(b) for capital goods, other than computers and computer peripherals @ 2.5% for each quarter.

(5A) If the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to
the duty leviable on transaction value.

(5B) If the value of any,

(i) input, or
(ii) capital goods before being put to use,

on which CENVAT credit has been taken is written off fully or where any provision to write off fully has
been made in the books of account, then the manufacturer or service provider, as the case may be, shall
pay an amount equivalent to the CENVAT credit taken in respect of the said input or capital goods:

Provided that if the said input or capital goods is subsequently used in the manufacture of final
products or the provision of taxable services, the manufacturer or output service provider, as the case
may be, shall be entitled to take the credit of the amount equivalent to the CENVAT credit paid earlier
subject to the other provisions of these rules.

(5C) Where on any goods manufactured or produced by an assessee, the payment of duty is ordered to
be remitted under rule 21 of the Central Excise Rules, 2002, the CENVAT credit taken on the inputs used
in the manufacture or production of said goods shall be reversed.

(6) The amount paid under sub-rule (5) and sub-rule (5A) shall be eligible as CENVAT credit as if it was a
duty paid by the person who removed such goods under sub-rule (5) and sub-rule (5A).

(7) Notwithstanding anything contained in sub-rule (1) and sub-rule (4),-

(a) CENVAT credit in respect of inputs or capital goods produced or manufactured, by a hundred
per cent. export-oriented undertaking or by a unit in an Electronic Hardware Technology Park
or in a Software Technology Park other than a unit which pays excise duty levied under
section 3 of the Excise Act read with serial numbers 3,5, 6 and 7 of notification No. 23/2003-
Central Excise, dated the 31st March, 2003, [G.S.R. 266(E), dated the 31st March, 2003] and
used in the manufacture of the final products or in providing an output service, in any other
place in India, in case the unit pays excise duty under section 3 of the Excise Act read with
serial number 2 of the notification No. 23/2003-Central Excise, dated the 31st March, 2003,
[G.S.R. 266(E), dated the 31st March, 2003], shall be admissible equivalent to the amount
calculated in the following manner, namely:-

Fifty per cent. of [X multiplied by {(1+BCD/100) multiplied by (CVD/100)}], where BCD and
CVD denote ad valorem rates, in per cent., of basic customs duty and additional duty of
customs leviable on the inputs or the capital goods respectively and X denotes the assessable
value:

Provided that the CENVAT credit in respect of inputs and capital goods cleared on or after
1st March, 2006 from an export oriented undertaking or by a unit in Electronic Hardware
Technology Park or in a Software Technology Park, as the case may be, on which such unit
pays excise duty under section 3 of the Excise Act read with serial number 2 of the notification
no. 23/2003-Central Excise dated 31st March, 2003 [G.S.R. 266(E), dated the 31st March,
2003] shall be equal to {X multiplied by [(1+BCD/200) multiplied by (CVD/100)]}.

Provided further that the CENVAT credit in respect of inputs and capital goods cleared on
or after the 7th September, 2009 from an export-oriented undertaking or by a unit in Electronic
Hardware Technology Park or in a Software Technology Park, as the case may be, on which
such undertaking or unit has paid –
 (A) excise duty leviable under section 3 of the Excise Act read with serial number 2 of the
notification no. 23/2003-Central Excise, dated 31st March, 2003 [G.S.R. 266(E), dated
the 31st March, 2003]; and
(B) the Education Cess leviable under section 91 read with section 93 of the Finance (No.
2) Act, 2004 and the Secondary and Higher Education Cess leviable under section 136
read with section 138 of the Finance Act, 2007, on the excise duty referred to in (A),
shall be the aggregate of –
(I) that portion of excise duty referred to in (A), as is equivalent to -
(i) the additional duty leviable under sub-section (1) of section 3 of the Customs Tariff Act,
which is equal to the duty of excise under clause (a) of sub-section (1) of section 3 of
the Excise Act;
(ii) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act;
and
(II) the Education Cess and the Secondary and Higher Education Cess referred to in (B).
(b) CENVAT credit in respect of -
(i) the additional duty of excise leviable under section 3 of the Additional Duties of Excise
(Textiles and
Textile Articles) Act, 1978 (40 of 1978);
(ii) the National Calamity Contingent duty leviable under section 136 of the Finance Act,
2001 (14 of
2001);
(iii) the education cess on excisable goods leviable under section 91 read with section 93
of the
Finance (No.2) Act, 2004 (23 of 2004);
(iiia) the Secondary and Higher Education Cess on excisable goods leviable under section
136 read with
section 138 of the Finance Act, 2007 (22 of 2007);
(iv) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the
duty of excise
specified under items (i), (ii) and (iii) above;
(v) the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of
2003);
(vi) the education cess on taxable services leviable under section 91 read with section 95
of the Finance
(No.2) Act, 2004 (23 of 2004); and
(via) the Secondary and Higher Education Cess on taxable services leviable under section
136 read with
section 140 of the Finance Act, 2007 (22 of 2007); and
(vii) the additional duty of excise leviable under section 85 of Finance Act, 2005 (18 of 2005
),
shall be utilised towards payment of duty of excise or as the case may be, of service tax
leviable under the said Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 or
the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14
of 2001), or the education cess on excisable goods leviable under section 91 read with
section 93 of the said Finance (No.2) Act, 2004 (23 of 2004), or the Secondary and Higher
Education Cess on excisable goods leviable under section 136 read with section 138 of the
Finance Act, 2007 (22 of 2007) or the additional duty of excise leviable under section 157 of
the Finance Act, 2003 (32 of 2003), or the education cess on taxable services leviable under
 section 91 read with section 95 of the said Finance (No.2) Act, 2004 (23 of 2004), or the
Secondary and Higher Education Cess on taxable services leviable under section 136 read
with section 140 of the Finance Act, 2007 (22 of 2007), or the additional duty of excise
leviable under section 85 of the Finance Act, 2005 (18 of 2005) respectively, on any final
products manufactured by the manufacturer or for payment of such duty on inputs
themselves, if such inputs are removed as such or after being partially processed or on any
output service:
Provided that the credit of the education cess on excisable goods and the education cess on
taxable services can be utilized, either for payment of the education cess on excisable goods
or for the payment of the education cess on taxable services:
Provided further that the credit of the Secondary and Higher Education Cess on excisable
goods and the Secondary and Higher Education Cess on taxable services can be utilized,
either for payment of the Secondary and Higher Education Cess on excisable goods or for the
payment of the Secondary and Higher Education Cess on taxable services
Explanation - For the removal of doubts, it is hereby declared that the credit of the additional
duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special
Importance) Act, 1957 (58 of 1957) paid on or after the 1st day of April, 2000, may
be utilised towards payment of duty of excise leviable under the First Schedule or the Second
Schedule to the Excise Tariff Act.
(c) the CENVAT credit, in respect of additional duty leviable under section 3 of the Customs Tariff
Act, paid on marble slabs or tiles falling under tariff items 2515 12 20 and 2515 12 90
respectively of the First Schedule to the Excise Tariff Act shall be allowed to the extent of
thirty rupees per square meter;
Explanation.- Where the provisions of any other rule or notification provide for grant of whole
or part exemption on condition of non-availability of credit of duty paid on any input or capital
goods, or of service tax paid on input service, the provisions of such other rule or notification
shall prevail over the provisions of these rules.
.
Rule 4. Conditions for allowing CENVAT credit. - (1) The CENVAT credit in respect of inputs may be
taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the
provider of output service:
Provided that in respect of final products, namely, articles of jewellery falling under heading 7113 of
the First Schedule to the Excise Tariff Act, the CENVAT credit of duty paid on inputs may be taken
immediately on receipt of such inputs in the registered premises of the person who get such final products
manufactured on his behalf, on job work basis, subject to the condition that the inputs are used in the
manufacture of such final product by the job worker.

(2) (a) The CENVAT credit in respect of capital goods received in a factory or in the premises of the
provider of output service 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:
Provided that the CENVAT credit in respect of capital goods shall be allowed for the whole amount
of the duty paid on such capital goods in the same financial year if such capital goods are cleared as such
in the same financial year.
Provided further that the CENVAT credit of the additional duty leviable under sub-section (5)
of section 3 of the Customs Tariff Act, in respect of capital goods shall be allowed immediately on receipt
of the capital goods in the factory of a manufacturer.
Provided also that where an assessee is eligible to avail of the exemption under a notification
based on the value of clearances in a financial year, the CENVAT credit in respect of capital
goods received by such assessee shall be allowed for the whole amount of the duty paid on such capital
goods in the same financial year.
Explanation.- For the removal of doubts, it is hereby clarified that an assessee shall be “eligible” if
his aggregate value of clearances of all excisable goods for home consumption in the preceding financial
year computed in the manner specified in the said notification did not exceed rupees four hundred lakhs.
(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, or in the premises of the
provider of output service, if the capital goods, other than components, spares and
accessories, refractories and refractory materials, moulds and dies and goods falling under heading 6805,
grinding wheels and the like, and parts thereof falling under heading 6804 of the First Schedule to the
Excise
Tariff Act, are in the possession of the manufacturer of final products, or provider of output service in such
subsequent years.
Illustration.- A manufacturer received machinery on the 16th day of April, 2002 in his factory.
CENVAT of two lakh rupees is paid on this machinery. The manufacturer can take credit upto a maximum
of one lakh rupees in the financial year 2002-2003, and the balance in subsequent years.

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

(4) The CENVAT credit in respect of capital goods shall not be allowed in respect of that part of the value
of capital goods which represents the amount of duty on such capital goods, which the manufacturer or
provider of output service claims as depreciation under section 32 of the Income-tax Act, 1961( 43 of
1961).

(5) (a) The CENVAT credit shall be 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 for
the manufacture of intermediate goods necessary for the manufacture of final products or any other
purpose, and it is established from the records, challans or memos or any other document produced by
the manufacturer or provider of output service taking the CENVAT credit that the goods are received back
in the factory within one hundred and eighty days of their being sent to a job worker and if the inputs or
the capital goods are not received back within one hundred eighty days, the manufacturer or provider of
output service shall pay an amount equivalent to the CENVAT credit attributable to the inputs or capital
goods by debiting the CENVAT credit or otherwise, but the manufacturer or provider of output service can
take the CENVAT credit again when the inputs or capital goods are received back in his factory or in the
premises of the provider of output service.

(b) The CENVAT credit shall also be allowed in respect of jigs, fixtures, moulds and dies sent by a
manufacturer of final products to,-

(i) another manufacturer for the production of goods; or

(ii) a job worker for the production of goods on his behalf, according to his specifications.

(6) The Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the
case may be, having jurisdiction over the factory of the manufacturer of the final products who has sent
the input or partially processed inputs outside his factory to a job-worker may, by an order, which shall be
valid for a financial year, in respect of removal of such input or partially processed input, and subject to
such conditions as he may impose in the interest of revenue including the manner in which duty, if
leviable, is to be paid, allow final products to be cleared from the premises of the job-worker.

(7) The CENVAT credit in respect of input service shall be allowed, on or after the day which payment is
made of the value of input service and the service tax paid or payable as is indicated in invoice, bill or, as
the case may be, challan referred to in rule 9.

Rule 5. Refund of CENVAT credit. -Where any input or input service is used in the manufacture of final
product which is cleared for export under bond or letter of undertaking, as the case may be, or used in the
intermediate product cleared for export, or used in providing output service which is exported, the
CENVAT credit in respect of the input or input service so used shall be allowed to be utilized by the
manufacturer or provider of output service towards payment of,

(i) duty of excise on any final product cleared for home consumption or for export on payment of
duty; or
(ii) service tax on output service,

and where for any reason such adjustment is not possible, the manufacturer or the provider of output
service shall be allowed refund of such amount subject to such safeguards, conditions and limitations, as
may be specified, by the Central Government, by notification:
Provided that no refund of credit shall be allowed if the manufacturer or provider of output service
avails of drawback allowed under the Customs and Central Excise Duties Drawback Rules, 1995, or
claims rebate of duty under the Central Excise Rules, 2002, in respect of such duty; or claims rebate of
service tax under the Export of Service Rules, 2005 in respect of such tax.
Provided further that no credit of the additional duty leviable under sub-section (5) of section 3 of
the Customs Tariff Act shall be utilised for payment of service tax on any output service.
Explanation: For the purposes of this rule, the words 'output service which is exported' means the
output service exported in accordance with the Export of Services Rules, 2005.

Rule 5A. Refund of CENVAT credit to units in specified areas.- Notwithstanding anything contrary
contained in these rules, where a manufacturer has cleared final products in terms of notification of the
Government of India in the Ministry of Finance (Department of Revenue) No.20/2007 - Central Excise,
dated the 25th April, 2007 and is unable to utilize the CENVAT credit of duty taken on inputs required for
manufacture of final products specified in the said notification, other than final products which are exempt
or subject to nil rate of duty, for payment of duties of excise on said final products, then the Central
Government may allow the refund of such credit subject to such procedure, conditions and limitations, as
may be specified by notification.
Explanation: For the purposes of this rule, “duty” means the duties specified in sub-rule (1) of rule 3
of these rules.

Rule 6. Obligation of manufacturer of dutiable and exempted goods and provider of taxable and
exempted services.- (1) The CENVAT credit shall not be allowed on such quantity of input or input
service which is used in the manufacture of exempted goods 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.

(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 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.

(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 either of the following
options, as applicable to him, namely:-

(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 percent. 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 specifiedin sub-rule (3A).
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.
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.

(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)
(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 taxable 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 taxable 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 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 taxable
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 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 taxable 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 paid within the said due date;
(f) 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, month
wise, 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), along with 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 taxable 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.
where the amount determined under condition (h) is not paid within the said due date, i.e., the
30th June, 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.
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.

(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.

(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.

(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-

(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
(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.
(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 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 of notification No. 6/2006-Central Excise, dated the 1st March, 2006.

Rule 7. Manner of distribution of credit by input service distributor. - The input service distributor
may distribute the CENVAT credit in respect of the service tax paid on the input service to its
manufacturing units or units providing output service, subject to the following condition, namely:-
(a) the credit distributed against a document referred to in rule 9 does not exceed the amount of service
tax paid thereon; or
(b) credit of service tax attributable to service use in a unit exclusively engaged in manufacture of
exempted goods or providing of exempted services shall not be distributed.

Rule 7A. Distribution of credit on inputs by the office or any other premises of output service
provider.- (1) A provider of output service shall be allowed to take credit on inputs and capital goods
received, on the basis of an invoice or a bill or a challan issued by an office or premises of the said
provider of output service, which receives invoices, issued in terms of the provisions of the Central Excise
Rules, 2002, towards the purchase of inputs and capital goods.

(2) The provisions of these rules or any other rules made under the Central Excise Act, 1944, as made
applicable to a first stage dealer or a second stage dealer, shall mutatis mutandis apply to such office or
premises of the provider of output service.

Rule 8. Storage of input outside the factory of the manufacturer.- The Deputy Commissioner of
Central Excise or the Assistant Commissioner of Central Excise, as the case may be, having jurisdiction
over the factory of a manufacturer of the final products may, in exceptional circumstances having regard
to the nature of the goods and shortage of storage space at the premises of such manufacturer, by an
order, permit such manufacturer to store the input in respect of which CENVAT credit has been taken,
outside such factory, subject to such limitations and conditions as he may specify:

Provided that where such input is not used in the manner specified in these rules for any reason
whatsoever, the manufacturer of the final products shall pay an amount equal to the credit availed in
respect of such input.

Rule 9. Documents and accounts.- (1) The CENVAT credit shall be taken by the manufacturer or the
provider of output service or input service distributor, as the case may be, on the basis of any of the
following documents, namely :-
(a) an invoice issued by-
(i) a manufacturer for clearance of -
(I) inputs or capital goods from his factory or depot or from the premises of the
consignment agent of
the said manufacturer or from any other premises from where the goods are sold by
or on behalf
of the said manufacturer;
(II) inputs or capital goods as such;
(ii) an importer;
(iii) an importer from his depot or from the premises of the consignment agent of the said
importer if the
said depot or the premises, as the case may be, is registered in terms of the
provisions of Central
Excise Rules, 2002;
 (iv) a first stage dealer or a second stage dealer, as the case may be, in terms of the
provisions of Central Excise Rules, 2002; or

(b) a supplementary invoice, issued by a manufacturer or importer of inputs or capital goods in

terms of the provisions of Central Excise Rules, 2002 from his factory or 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 duties or additional duty leviable under section 3 of the
Customs Tariff Act, has been paid, except where the additional amount of duty became
recoverable from the manufacturer or importer of inputs or capital goods on account of any non-
levy or short-levy by reason of fraud, collusion or any wilfulmisstatement or suppression of facts
or contravention of any provisions of the Excise Act, or of the Customs Act, 1962 (52 of 1962) or
the rules made there under with intent to evade payment of duty.

Explanation.- For removal of doubts, it is clarified that supplementary invoice shall also include
challan or any other similar document evidencing payment of additional amount of additional
duty leviable under section 3 of the Customs Tariff Act; or
(c) a bill of entry; or
(d) a certificate issued by an appraiser of customs in respect of goods imported through a Foreign
Post Office; or
(e) a challan evidencing payment of service tax by the person liable to pay service tax under sub-
clauses (iii), (iv), (v) and (vii) of clause (d) of sub-rule (1) of rule (2) of the Service Tax Rules,
1994; or
(f) an invoice, a bill or challan issued by a provider of input service on or after the 10th day of,
September, 2004; or
(g) an invoice, bill or challan issued by an input service distributor under rule 4A of the Service Tax
Rules, 1994.

Provided that the credit of additional duty of customs levied under sub-section (5) of section 3 of the
Customs Tariff Act, 1975 (51 of 1975) shall not be allowed if the invoice or the supplementary invoice, as
the case may be, bears an indication to the effect that no credit of the said additional duty shall be
admissible;

(2) No CENVAT credit under sub-rule(1) shall be taken unless all the particulars as prescribed under
the Central Excise Rules, 2002 or the Service Tax Rules, 1994, as the case may be, are contained in the
said document:
Provided that if the said document does not contain all the particulars but contains the details of
duty or service tax payable, description of the goods or taxable service, assessable value, Central Excise
or Service tax Registration number of the person issuing the invoice, as the case may be, name and
address of the factory or warehouse or premises of first or second stage dealers or provider of taxable
service, and the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central
Excise, as the case may be, is satisfied that the goods or services covered by the said document have
been received and accounted for in the books of the account of the receiver, he may allow the CENVAT
credit;

(3) Omitted

(4) The CENVAT credit in respect of input or capital goods purchased from a first stage dealer or second
stage dealer shall be allowed only if such first stage dealer or second stage dealer, as the case may be,
has maintained records indicating the fact that the input or capital goods was supplied from the stock on
which duty was paid by the producer of such input or capital goods and only an amount of such duty on
pro rata basis has been indicated in the invoice issued by him.
(5) The manufacturer of final products or the provider of output service shall maintain proper records for
the receipt, disposal, consumption and inventory of the input and capital goods in which the relevant
information regarding the value, duty paid, CENVAT credit taken and utilized, the person from whom the
input or capital goods have been procured is recorded and the burden of proof regarding the admissibility
of the CENVAT credit shall lie upon the manufacturer or provider of output service taking such credit.

(6) The manufacturer of final products or the provider of output service shall maintain proper records for
the receipt and consumption of the input services in which the relevant information regarding the value,
tax paid, CENVAT credit taken and utilized, the person from whom the input service has been procured is
recorded and the burden of proof regarding the admissibility of the CENVAT credit shall lie upon the
manufacturer or provider of output service taking such credit.

(7) The manufacturer of final products shall submit within ten days from the close of each month to the
Superintendent of Central Excise, a monthly return in the form specified, by notification, by the Board:
Provided that where a manufacturer is availing exemption under a notification based on the value
or quantity of clearances in a financial year, he shall file a quarterly return in the form specified, by
notification, by the Board within twenty days after the close of the quarter to which the return relates.

(8) A first stage dealer or a second stage dealer, as the case may be, shall submit within fifteen days from
the close of each quarter of a year to the Superintendent of Central Excise, a return in the form specified,
by notification, by the Board.

(9) The provider of output service availing CENVAT credit, shall submit a half yearly return in form
specified, by notification, by the Board to the Superintendent of Central Excise, by the end of the month
following the particular quarter or half year.

(10) The input service distributor, shall furnish a half yearly return in such form as may be specified, by
notification, by the Board, giving the details of credit received and distributed during the said half year to
the jurisdictional Superintendent of Central Excise, not later than the last day of the month following the
half year period.

(11) The provider of output service, availing CENVAT credit referred to in sub-rule (9) or the input service
distributor referred to in sub-rule (10), as the case may be, may submit a revised return to correct a
mistake or omission within a period of sixty days from the date of submission of the return under sub-rule
(9) or sub-rule (10), as the case may be.

Rule 9A. – Information relating to principal inputs. - (1) A manufacturer of final products shall furnish
to the Superintendent of Central Excise, annually by 30th April of each Financial Year, a declaration in the
Form specified, by a notification, by the Board, in respect of each of the excisable goods manufactured or
to be manufactured by him, the principal inputs and the quantity of such principal inputs required for use
in the manufacture of unit quantity of such final products:
Provided that for the year 2004-05, such information shall be furnished latest by 31st December, 2004.

(2) If a manufacturer of final products intends to make any alteration in the information so furnished under
sub-rule (1), he shall furnish information to the Superintendent of Central Excise together with the
reasons for such alteration before the proposed change or within 15 days of such change in the Form
specified by the Board under sub-rule (1).

(3) A manufacturer of final products shall submit, within ten days from the close of each month, to the
Superintendent of Central Excise, a monthly return in the Form specified, by a notification, by the Board,
in respect of information regarding the receipt and consumption of each principal inputs with reference to
the quantity of final products manufactured by him.

(4) The Central Government may, by notification and subject to such conditions or limitations, as may be
specified in such notification, specify manufacturers or class of manufacturers who may not be required to
furnish declaration mentioned in sub-rule (1) or monthly return mentioned in sub-rule (3).
 Explanation: For the purposes of this rule, “principal inputs”, means any input which is used in the
manufacture of final products where the cost of such input constitutes not less than 10% of the total cost
of raw-materials for the manufacture of unit quantity of a given final products.

Rule 10. 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 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.

(2) If a provider of output service shifts or transfers his business on account of change in ownership or on
account of sale, 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, merged,
leased or amalgamated business.

(3) The transfer of the CENVAT credit under sub-rules (1) and (2) 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 inputs, 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.

Rule 11. Transitional provision.- (1) Any amount of credit earned by a manufacturer under the
CENVAT Credit Rules, 2002, as they existed prior to the 10th day of September, 2004 or by a provider of
output service under the Service Tax Credit Rules, 2002, as they existed prior to the 10th day of
September, 2004, and remaining unutilized on that day shall be allowed as CENVAT credit to such
manufacturer or provider of output service under these rules, and be allowed to be utilized in accordance
with these rules.

(2) A manufacturer who opts for exemption from the whole of the duty of excise leviable on goods
manufactured by him under a notification based on the value or quantity of clearances in a financial year,
and who has been taking CENVAT credit on inputs or input services before such option is exercised, 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 in process or contained in final products lying in stock on the date when such option is
exercised and 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.

(3) A manufacturer or producer of a final product shall be required to pay an amount equivalent to the
CENVAT credit, if any, taken by him in respect of inputs received for use in the manufacture of the said
final product and is lying in stock or in process or is contained in the final product lying in stock, if,-

(i) he opts for exemption from whole of the duty of excise leviable on the said final product
manufactured or produced by him under a notification issued under section 5A of the Act; or
(ii) the said final product has been exempted absolutely under section 5A of the Act, and after
deducting the said amount from the balance of CENVAT credit, 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 other final product whether cleared for home consumption or for export, or for
payment of service tax on any output service, whether provided in India or exported.

(4) A provider of output service shall be required to pay an amount equivalent to the CENVAT credit, if
any, taken by him in respect of inputs received for providing the said service and is lying in stock or is
contained in the taxable service pending to be provided, when he opts for exemption from payment of
whole of the service tax leviable on such taxable service under a notification issued under section 93 of
the Finance Act, 1994 (32 of 1994) and after deducting the said amount from the balance of CENVAT
credit, 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 or for payment of service tax on any other output service, whether provided in India or exported.

Rule 12. Special dispensation in respect of inputs manufactured in factories located in specified
areas of North East region, Kutch district of Gujarat, State of Jammu and Kashmir and State of
Sikkim. - Notwithstanding anything contained in these rules, where a manufacturer has cleared any
inputs or capital goods, in terms of notifications of the Government of India in the Ministry of Finance
(Department of Revenue) No. 32/99- Central Excise, dated the 8th July, 1999 [G.S.R. 508(E), dated the
8th July, 1999] or No. 33/99- Central Excise, dated the 8th July, 1999 [G.S.R. 509(E), dated the 8th July,
1999] or No. 39/2001-Central Excise, dated the 31st July, 2001 [G.S.R. 565(E), dated the 31st July, 2001]
or notification of the Government of India in the erstwhile Ministry of Finance and Company Affairs
(Department of Revenue) No.56/2002-Central Excise, dated the 14th November, 2002 [G.S.R. 764(E),
dated 14th November, 2002]or No.57/2002-Central Excise, dated the 14th November, 2002 [ GSR
765(E), dated the 14th November, 2002] or notification of the Government of India in the Ministry of
Finance (Department of Revenue) No. 56/2003-Central Excise, dated the 25th June, 2003 [G.S.R. 513
(E), dated the 25th June, 2003] or 71/2003-Central Excise, dated the 9th September, 2003 [G.S.R.717
(E), dated the 9th September, 2003, or No.20/2007-Central Excise, dated the 25th April, 2007 [ GSR 307
(E), dated the 25th April, 2007] the CENVAT credit on such inputs or capital goods shall be admissible as
if no portion of the duty paid on such inputs or capital goods was exempted under any of the said
notifications.

Rule 12A. Procedure and facilities for large taxpayer.- Notwithstanding anything contained in these
rules, the following procedure shall apply to a large taxpayer,-

(1) A large taxpayer may remove inputs, except motor spirit, commonly known as petrol, high speed
diesel and light diesel oil or capital goods, as such, on which CENVAT credit has been taken, without
payment of an amount specified in sub-rule (5) of rule 3 of these rules, under the cover of a transfer
challan or invoice, from any of his registered premises (hereinafter referred to as the sender premises) to
his other registered premises, other than a premises of a first or second stage dealer (hereinafter referred
to as the recipient premises), for further use in the manufacture or production of final products in recipient
premises subject to condition that

(a) the final products are manufactured or produced using the said inputs and cleared on payment
of appropriate duties of excise leviable thereon within a period of six months, from the date of
receipt of the inputs in the recipient premises; or
(b) the final products are manufactured or produced using the said inputs and exported out of India,
under bond or letter of undertaking within a period of six months, from the date of receipt of the
input goods in the recipient premises, and that any other conditions prescribed by the
Commissioner of Central Excise, Large Taxpayer Unit in this regard are satisfied:

Explanation 1- The transfer challan or invoice shall be serially numbered and shall contain the
registration number, name, address of the large taxpayer, description, classification, time and date of
removal, mode of transport and vehicle registration number, quantity of the goods and registration
number and name of the consignee:
Provided that if the final products manufactured or produced using the said inputs are not cleared
on payment of appropriate duties of excise leviable thereon or are not exported out of India within
the said period of six months from the date of receipt of the input goods in the recipient premises, or such
inputs are cleared as such from the recipient premises, an amount equal to the credit taken in respect of
such inputs by the sender premises shall be paid by the recipient premises with interest in the manner
and rate specified under rule 14 of these rules:
Provided further that if such capital goods are used exclusively in the manufacture of exempted
goods, or such capital goods are cleared as such from the recipient premises, an amount equal to the
credit taken in respect of such capital goods by the sender premises shall be paid by the recipient
premises with interest in the manner and rate specified under rule 14 of these rules:
Explanation 2 -- If a large taxpayer fails to pay any amount due in terms of the first and second
proviso, it shall be recovered along with interest in the manner as provided under rule 14 of these rules:
Provided also that nothing contained in this sub-rule shall be applicable if the recipient premises is
availing following notifications of Government of India in the Ministry of Finance (Department of
Revenue), -

(i) No. 32/99-Central Excise, dated the 8th July, 1999 [G.S.R. 508(E), dated 8th July, 1999];
(ii) No. 33/99-Central Excise, dated the 8th July, 1999 [G.S.R. 509(E), dated 8th July, 1999];
(iii)No. 39/2001-Central Excise, dated the 31st July, 2001 [G.S.R. 565 (E), dated the 31st July,
2001];
(iv) No. 56/2002-Central Excise, dated the 14th November, 2002 [G.S.R. 764(E), dated the
14th November, 2002];
(v) No. 57/2002-Central Excise, dated 14th November, 2002 [G.S.R. 765(E), dated the 14th
November,
2002];
(vi) No. 56/2003-Central Excise, dated the 25th June, 2003 [G.S.R. 513 (E), dated the 25th
June, 2003];
(vii) No. 71/2003-Central Excise, dated the 9th September, 2003 [G.S.R. 717 (E), dated the 9th
September, 2003]; and
(viii) No.20/2007-Central Excise, dated the 25th April, 2007 [ GSR 307 (E), dated the 25th April,
2007];
Provided also that nothing contained in this sub-rule shall be applicable to a export oriented unit
or a unit located in a Electronic Hardware Technology Park or Software Technology Park.

(2) The first recipient premises may take CENVAT credit of the amount paid under first proviso to sub-
rule(1) as if it was a duty paid by the sender premises who removed such goods on the basis of a
document showing payment of such duties.

(3) CENVAT credit of the specified duties taken by a sender premises shall not be denied or varied in
respect of any inputs or capital goods,-

(a) removed as such under sub-rule (1) on the ground that the said inputs or the capital goods
have been
removed without payment of an amount specified in sub-rule (5) of rule 3 of these rules; or
(b) on the ground that the said inputs or capital goods have been used in the manufacture of any
intermediate goods removed without payment of duty under sub-rule (1) of rule 12BB of Central
Excise
Rules, 2002.

Explanation: For the purpose of this sub-rule, ' intermediate goods ' shall have the same meaning
assigned to it in sub-rule (1) of rule 12BB of the Central Excise Rules, 2002.

(4) A large taxpayer may transfer, CENVAT credit available with one of his registered manufacturing
premises or premises providing taxable service to his other such registered premises by,-

(i) making an entry for such transfer in the record maintained under rule 9;
(ii) issuing a transfer challan containing registration number, name and address of the registered
premises transferring the credit as well as receiving such credit, the amount of credit
transferred and the particulars of such entry as mentioned in clause (i),

and such recipient premises can take CENVAT credit on the basis of such transfer challan as mentioned
in clause (ii):
Provided that such transfer or utilisation of CENVAT credit shall be subject to the limitations
prescribed under clause (b) of sub-rule (7) of rule 3.
Provided further that nothing contained in this sub-rule shall be applicable if the registered
manufacturing premises is availing following notifications of Government of India in the Ministry of
Finance (Department of Revenue), -

(i) No. 32/99-Central Excise, dated the 8th July, 1999 [G.S.R. 508(E), dated 8th July, 1999];
(ii) No. 33/99-Central Excise, dated the 8th July, 1999 [G.S.R. 509(E), dated 8th July, 1999];
(iii) No. 39/2001-Central Excise, dated the 31st July, 2001 [G.S.R. 565 (E), dated the 31st July,
2001];
(iv) No. 56/2002-Central Excise, dated the 14th November, 2002 [G.S.R. 764(E), dated the 14th
November, 2002];
(v) No. 57/2002-Central Excise, dated 14th November, 2002 [G.S.R.. 765(E), dated the 14th
November, 2002];
(vi) No. 56/2003-Central Excise, dated the 25th June, 2003 [G.S.R. 513 (E), dated the 25th June,
2003];
(vii) No. 71/2003-Central Excise, dated the 9th September, 2003 [G.S.R. 717 (E), dated the 9th
September, 2003]; and
(viii) No.20/2007-Central Excise, dated the 25th April, 2007 [ GSR 307 (E), dated the 25th April,
2007];

(5) A large taxpayer shall submit a monthly return, as prescribed under these rules, for each of the
registered premises.

(6) Any notice issued but not adjudged by any of the Central Excise officer administering the Act or rules
made thereunder immediately before the date of grant of acceptance by the Chief Commissioner of
Central Excise, Large Taxpayer Unit, shall be deemed to have been issued by Central Excise officers of
the said Unit.

(7) Provisions of these rules, in so far as they are not inconsistent with the provisions of this rule shall
mutatis mutandis apply in case of a large taxpayer.

Rule 12AA. Power to impose restrictions in certain types of cases.- Notwithstanding anything
contained in these rules, where the Central Government, having regard to the extent of misuse of
CENVAT credit, nature and type of such misuse and such other factors as may be relevant, is of the
opinion that in order to prevent the misuse of the provisions of CENVAT credit as specified in these rules,
it is necessary in the public interest to provide for certain measures including restrictions on a
manufacturer, first stage and second stage dealer or an exporter, may by a notification in the Official
Gazette, specify nature of restrictions including restrictions on utilization of CENVAT credit and
suspension of registration in case of a dealer and type of facilities to be withdrawn and procedure for
issue of such order by an officer authorized by the Board.

Rule 13. Power of Central Government to notify goods for deemed CENVAT credit.-
Notwithstanding anything contained in rule 3, the Central Government may, by notification, declare the
input or input service on which the duties of excise, or additional duty of customs or service tax paid, shall
be deemed to have been paid at such rate or equivalent to such amount as may be specified in that
notification and allow CENVAT credit of such duty or tax deemed to have been paid in such manner and
subject to such conditions as may be specified in that notification even if, in the case of input, the
declared input, or in the case of input service, the declared input service, as the case may be, is not used
directly by the manufacturer of final products, or as the case may be, by the provider of taxable service,
declared in that notification, but contained in the said final products, or as the case may be, used in
providing the taxable service.
Rule 14. Recovery of CENVAT credit wrongly taken or erroneously refunded.- Where the CENVAT
credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest
shall be recovered from the manufacturer or the provider of the output service and the provisions of
sections 11A and 11AB of the Excise Act or sections 73 and 75 of the Finance Act, shall apply mutatis
mutandis for effecting such recoveries.

Rule 15. Confiscation and penalty.- (1) If any person, takes or utilises CENVAT credit in respect of
input or capital goods or input services, wrongly or in contravention of any of the provisions of these rules,
then, all such goods shall be liable to confiscation and such person, shall be liable to a penalty not
exceeding the duty or service tax on such goods or services, as the case may be, or two thousand
rupees, whichever is greater.

(2) In a case, where the CENVAT credit in respect of input or capital goods or input services has been
taken or utilised wrongly by reason of fraud, collusion or any wilful mis-statement or suppression of facts,
or contravention of any of the provisions of the Excise Act, or of the rules made thereunder with intent 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 Excise Act.

(3) In a case, where the CENVAT credit in respect of input or capital goods or input services has been
taken or utilised wrongly by reason of fraud, collusion or any wilful mis-statement or suppression of facts,
or contravention of any of the provisions of these rules or of the Finance Act or of the rules
made thereunder with intent to evade payment of service tax, then, the provider of output service shall
also be liable to pay penalty in terms of the provisions of Section 78 of the Finance Act.

(4) Any order under sub-rule (1), sub-rule (2) or sub-rule (3) shall be issued by the Central Excise Officer
following the principles of natural justice.

Rule 15A. General penalty.- Whoever contravenes the provisions of these rules for which no penalty has
been provided in the rules, he shall be liable to a penalty which may extend to five thousand rupees.

Rule 16. Supplementary provision. - (1) Any notification, circular, instruction, standing order, trade
notice or other order issued under the CENVAT Credit Rules, 2002 or the Service Tax Credit Rules,
2002, by the Central Government, the Central Board of Excise and Customs, the Chief Commissioner of
Central Excise or the Commissioner of Central Excise, and in force at the commencement of these rules,
shall, to the extent it is relevant and consistent with these rules, be deemed to be valid and issued under
the corresponding provisions of these rules.

(2) References in any rule, notification, circular, instruction, standing order, trade notice or other order to
the CENVAT Credit Rules, 2002 and any provision thereof or, as the case may be, the Service Tax Credit
Rules, 2002 and any provision thereof shall, on the commencement of these rules, be construed as
references to the CENVAT Credit Rules, 2004 and any corresponding provision thereof.