3. CENVAT credit.-

(1) A manufacturer or producer of final products 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 Tariff Act, leviable under the Act;

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

(iii) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (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), as amended by section 169 of the Finance Act, 2003 (32 of 2003) which was amended by section 3 of the Finance Act, 2004 (13 of 2004);

(vi) the Education Cess on excisable goods leviable under clause 81 read with clause 83 of the Finance Bill (No.2), 2004, which by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931(16 of 1931), has the force of law;

(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) and (vi) above; and

(viii) the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of 2003).

(Clauses (v), (vi) & (vii) has been substituted & (viii) has been add vide Ntf. No. 12/2004-CE(N.T.), Dt. 09/07/2004)

[OLD -
(v) the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001), as amended by section 169 of the Finance Act, 2003 (32 of 2003);

(Above Clause (v) has been substituted vide Ntf. No. 46/2003-CE(N.T.), Dt. 14/05/2003)

[OLD-
(v) the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001), as amended by clause 161 of the Finance Bill, 2003, which clause has, by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931 (16 of 1931), the force of law; and

(Clause (v) has been substituted vide Ntf. No. 13/2003-CE(NT), DT. 01/03/2003)

[OLD- (v) the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001); and ]

(vi) the additional duty of excise leviable under sub-clause (1) of clause 149 of the Finance Bill, 2003, which clause has, by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931 ( 16 of 1931), the force of law."; and

(Above Clause (vi) has been inserted vide NTF. NO. 19/2003-CE(N.T.) DT. 24/03/2003)

[OLD-
(vi) 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) and (v) above;and ]

(vii) the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of 2003),

(In Clause (vi) Bold letter has been substituted and Clause (vii), vide Ntf. No. 46/2003-CE(N.T.), Dt. 14/05/2003) ]

paid on any inputs or capital goods received in the factory on or after the first day of March, 2002, including the said duties paid on any inputs 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 25 th March, 1986, published vide number G.S.R. 547 (E), dated the 25 th March, 1986, and received by the manufacturer for use in, or in relation to, the manufacture of final products, on or after the first day of March, 2002.

Explanation.- For the removal of doubts it is clarified that the manufacturer of the final products shall be allowed CENVAT credit of additional duty leviable under section 3 of the Customs Tariff Act on goods falling under heading 98.01 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 cease to be exempted goods or any goods become excisable.

(3) 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.

(Sub-rule (3) has been substituted vide NTF. NO. 18/2003-CE(N.T.), DT. 13/03/2003 for further amendments)

[OLD
(3) The CENVAT credit may be utilized for payment of any duty of excise on any final products or for payment of duty on inputs or capital goods themselves if such inputs are removed as such or after being partially processed, or such capital goods are removed as such:]

Provided that while paying duty, the CENVAT credit shall be utilized only to the extent such credit is available on the last day of the month for payment of duty relating to the month.

(Above first proviso has been substituted with effect from the 1st day of April, 2003 vide Ntf. No. 13/2003-CE(NT), DT. 01/03/2003)

[OLD- Provided that while paying duty, the CENVAT credit shall be utilised only to the extent such credit is available on the fifteenth day of a month for payment of duty relating to the first fortnight of the month, and the last day of a month for payment of duty relating to the second fortnight of the month or in case of a manufacturer availing exemption by a notification based on value of clearances in a financial year, for payment of duty relating to the entire month. ]

Provided further that the CENVAT credit of the duty paid on the inputs used in the manufacture of final products cleared after availing of the exemption under the notification numbers 32/99-Central Excise, dated the 8th July 1999 [G.S.R. 508 (E) dated the 8th July 1999] and 33/99-Central Excise dated the 8th July 1999 [G.S.R. 509 (E) dated the 8th July 1999], shall be utilized only for payment of duty on final products cleared after availing of the exemption under the said notification numbers 32/99-Central Excise, dated the 8th July 1999 and 33/99-Central Excise, dated the 8th July 1999.

(Above second proviso has been inserted vide Ntf. No. 42/2002-CE, DT. 23/12/2002)

Provided also that the CENVAT credit of the duty paid on the inputs used in the manufacture of final products cleared after availing of the exemption under the notifications No. 39/2001-Central Excise, dated the 31st July, 2001 [G.S.R. 565 (E), dated the 31st July, 2001], No.56/2002-Central Excise, dated the 14th November, 2002 [G.S.R. 764(E), dated the 14th November, 2002], No.57/2002-Central Excise, dated 14th November, 2002 [G.S.R. 765(E), dated the 14th November, 2002], 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], and No. 71/2003-Central Excise, dated the 9th September, 2003 [G.S.R. 717 (E), dated the 9th September, 2003], shall respectively be utilized only for payment of duty on final products, in respect of which exemption under the said notifications No.39/2001-Central Excise, dated the 31st July, 2001, No.56/2002-Central Excise, dated the 14th November, 2002, No.57/2002-Central Excise, dated 14th November, 2002, No.56/2003-Central Excise, dated the 25th June, 2003, and No.71/2003-Central Excise, dated the 9th September, 2003, is availed of.

(Above third proviso has been substituted vide Ntf. No. 65/2003-CE(N.T.), Dt. 09/09/2003)

[OLD -
Provided also that the CENVAT credit of the duty paid on the inputs used in the manufacture of final products cleared after availing of the exemption under the notifications No. 39/2001-Central Excise, dated the 31st July, 2001 [G.S.R. 565 (E), dated the 31st July, 2001], No.56/2002-Central Excise, dated the 14th November, 2002 [G.S.R. 764(E), dated the 14th November, 2002], No.57/2002-Central Excise, dated 14th November, 2002 [G.S.R. 765(E), dated the 14th November, 2002] and No.56/2003-Central Excise, dated the 25th June, 2003 [G.S.R. 513 (E), dated the 25th June, 2003] shall respectively be utilized only for payment of duty on final products, in respect of which exemption under the said notifications No.39/2001-Central Excise, dated the 31st July, 2001, No.56/2002-Central Excise, dated the 14th November, 2002, No.57/2002-Central Excise, dated 14th November, 2002 and No.56/2003-Central Excise, dated the 25th June, 2003, is availed.

(Above third proviso has been Substituted vide Ntf. No. 57/2003-CE(N.T.), Dt. 25/06/2003)

Provided further that the CENVAT credit of the duty paid on the inputs used in the manufacture final products cleared after availing of the exemption under the notifications number 39/2001-Central Excise, dated the 31st July, 2001 [G.S.R. 565(E) dated the 31st July, 2001], 56/2002-Central Excise dated the 14th November, 2002[G.S.R. 764 (E) dated 14th November, 2002] and 57/2002-Central Excise dated the 14th November, 2002[G.S.R. 765 (E) dated 14th November, 2002], shall respectively be utilised only for payment of duty on final products, in respect of which exemption under the said notifications number 39/2001-Central Excise dated the 31st July, 2001, 56/2002- Central Excise dated 14th November, 57/2002- Central Excise dated 14th November, 2002, is availed.

(Above Third proviso has been inserted vide Ntf. No. 07/2003-CE(NT), DT. 13/02/2003) ]

(4) When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, the manufacturer of the final products 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 7.

(sub-rule (4) has been substituted vide Ntf. No. 13/2003-CE(NT), DT. 01/03/2003)

[OLD - (4) When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, the manufacturer of the final products shall pay an amount equal to the duty of excise which is leviable on such goods at the rate applicable to such goods on the date of such removal and on the value determined for such goods under sub-section (2) of section 3 or section 4 or section 4A of the Act, as the case may be, and such removal shall be made under the cover of an invoice referred to in rule 7.]

(4A) Notwithstanding any thing contained in these rules,-

(a) a first or second stage dealer, dealing exclusively in goods falling under Chapter 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62 or 63 of the First Schedule to the Tariff Act, may, at his option, remove such goods, whether or not after undertaking activities such as packing, repacking, on payment of an amount equal to the duty of excise, which is leviable on such goods at the rate applicable on the date of removal and on the value determined for such goods under sub-section (2) of section 3 or section 4 of the Act, as the case may be. The provisions of the Central Excise Rules, 2002, in so far they relate to removal of goods on invoice, maintenance of accounts, filing of return, manner of payment or failure to pay such amount shall apply, as if such amount is a duty of excise liable to be paid by an assessee:

Provided that such option once exercised by the said dealer, shall not be withdrawn during the remaining part of the financial year;

(b) the first or second stage dealer of goods referred to in clause (a), who avails of the option referred to in said clause, may take credit of duties referred to in sub-rule (1) of Rule 3, paid on such goods for utilizing the same for payment of such amount, as referred to in clause (a);

(c) the amount paid under clause (a) shall be eligible as CENVAT credit as if it were a duty paid by a person who removes such goods under sub-rule (4A).

(Sub-rule (4A) has been inserted vide NTF. NO. 34/2003-CE(N.T.), DT. 10/04/2003)

(5) The amount paid under sub-rule (4) shall be eligible as CENVAT credit as if it was a duty paid by the person who removed such goods under sub-rule (4).

(6) Notwithstanding anything contained in sub-rule (1),-

(a) CENVAT credit in respect of inputs or capital goods produced or manufactured,-


(i) 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 section3 of the 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 in any other place in India, in case the unit pays excise duty under section 3 of the 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.

(Above Sub-clause(i) has been substituted vide Ntf. No. 70/2003-CE(N.T.), Dt. 15/09/2003)

[OLD -
(i) in a free trade zone or by a hundred per cent. export-oriented undertaking or by a unit in an Electronic Hardware Technology Park or Software Technology Park (other than a unit which pays excise duty under section 3 of the Act read with notification No. 8/97- Central Excise, dated the 1 st March, 1997, number G.S.R 114 (E), dated the 1 st March, 1997 or No. 20/2002-Central Excise, dated the 1 st March, 2002) and used in the manufacture of the final products in any other place in India, in case the unit pays excise duty under section 3 of the Act read with notification No. 2/95-Central Excise, dated the 4 th January, 1995, number G.S.R. 189 (E), dated the 4 th January, 1995, 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. ]

(ii) in a Special Economic Zone, and used in the manufacture of the final products in any other place in India, shall be admissible equivalent to the amount calculated in the following manner, namely:-

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.


(b) CENVAT credit in respect of -

(i) the addition 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), as amended by section 169 of the Finance Act, 2003 (32 of 2003) which was amended by section 3 of the Finance Act, 2004 ( 13 of 2004);

(iii) the Education Cess on excisable goods leviable under clause 81 read with clause 83 of the Finance Bill (No.2), 2004, which by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931, has the force of law; and

(iv) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii) and (iii) above; and

(v) the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of 2003), shall be utilized only towards payment of duty of excise leviable under the said Additional Duties of Excise (Textiles and Textile Articles) Act, or the the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001, as amended by section 169 of the Finance Act, 2003 which was amended by section 3 of the Finance Act, 2004, or the Education Cess on excisable goods leviable under clause 81 read with clause 83 of the Finance Bill (No.2), 2004, which by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931, has the force of law, 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.

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) and 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 Central Excise Tariff Act, 1985 (5 of 1986)(Above Explanation has been substituted vide Budget 2004-2005)

(In sub-rule (6), clause (b) has been substituted vide Ntf. No. 12/2004-CE(N.T.), Dt. 09/07/2004)

[OLD -
(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) as amended by section 169 of the Finance Act, 2003 (32 of 2003);

(iii) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under sub-clauses (i) and (ii); and

(iv) the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of 2003),


shall be utilized only towards payment of duty of excise leviable under the said Additional Duties of Excise (Textiles and Textile Articles) Act, or the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001) as amended by section 169 of the Finance Act, 2003 (32 of 2003), or the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of 2003), 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.

Explanation.- For removal of doubts, it is clarified 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), may be utilised towards payment of duty of excise leviable under the First Schedule or the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986). ]

(Above Clause (b) has been substituted vide Ntf. No. 46/2003-CE(N.T.), Dt. 14/05/2003)

[OLD -
(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) as amended by clause 161 of the Finance Bill, 2003, which clause has, by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931(16 of 1931), the force of law;

(iii) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under sub-clauses (i) and (ii) above; and

(iv) the additional duty of excise leviable under section 149 of the Finance Bill, 2003, which clause has, by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931 (16 of 1931), the force of law,

shall be utilized only towards payment of duty of excise leviable under the said Additional Duties of Excise (Textiles and Textile Articles) Act, or the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001) as amended by clause 161 of the Finance Bill, 2003, which clause has, by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931(16 of 1931), the force of law, or the additional duty of excise leviable under clause 149 of the Finance Bill, 2003, which clause has, by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931 (16 of 1931), the force of law, 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.]

Explanation.- For removal of doubts, it is clarified 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), may be utilised towards payment of duty of excise leviable under the First Schedule or the Second Schedule of the Central Excise Tariff Act, 1985 (5 of 1986).

(Sub-rule(6) Clause (b) has been substituted vide NTF. NO. 19/2003-CE(N.T.) DT. 24/03/2003)

(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 as amended by clause 161 of the Finance Bill, 2003, which clause has, by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931, the force of law; and

(iii) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i) and (ii) above,

shall be utilized only towards payment of duty of excise leviable under the said Additional Duties of Excise (Textiles and Textile Articles) Act, or the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 as amended by clause 161 of the Finance Bill, 2003, which clause has, by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931, the force of law, 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;

Explanation.- For removal of doubts, it is clarified 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), may be utilised towards payment of duty of excise leviable under the First Schedule or the Second Schedule of the Central Excise Tariff Act, 1985 (5 of 1986);”;

(Clause (b) has been substituted vide Ntf. No. 13/2003-CE(NT), DT. 01/03/2003)

(b) CENVAT credit in respect of -


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

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

(iii) the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001; and

(iv) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii) and (iii) above,
shall be utilized only towards payment of duty of excise leviable under the said Additional Duties of Excise (Textiles and Textile Articles) Act, or under the said Additional Duties of Excise (Goods of Special Importance) Act, or the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 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;]

(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 sub-heading No. 2504.21 or 2504.31 respectively of the First Schedule to the Tariff Act shall be allowed to the extent of thirty rupees per square metre;

[OMITTED
(d) the CENVAT credit of the duty paid on the inputs shall not be allowed in respect of texturised yarn (including draw-twisted or draw-wound yarn) of polyesters falling under heading No. 54.02 of the First Schedule to the Tariff Act, manufactured by an independent texturiser, that is to say, a manufacturer engaged in the manufacture of texturised yarn (including draw-twisted or draw-wound yarn) of polyesters falling under heading No. 54.02 of the said First Schedule, who does not have the facility in his factory (including plant and machinery) for manufacture of partially oriented yarn of polyesters falling under sub-heading No. 5402.42 of the said First Schedule. ]

(Clause (d) has been omitted with effect from the 1st day of April, 2003 vide Ntf. No. 13/2003-CE(NT), DT. 01/03/2003)

Explanation.- Where the provisions of any other rule or notification provide for grant of partial or full exemption on condition of non-availability of credit of duty paid on any input or capital goods, the provisions of such other rule or notification shall prevail over the provisions of these rules.

(Please refer CIR NO.701/17/2003-CX, DT. 12/03/2003) ]

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