6. Obligation of manufacturer of dutiable and exempted goods.-

(1) The CENVAT credit shall not be allowed on such quantity of inputs which is used in the manufacture of exempted goods, except in the circumstances mentioned in sub-rule (2).

Provided the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12 B 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.

(Above proviso has been inserted vide NTF. NO. 25/2003-CE(N.T.), DT. 25/03/2003)

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

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

(a) if the exempted goods are-


(i) goods falling within heading No. 22.04 of the First Schedule to the Tariff Act;
(ii) Low Sulphur Heavy Stock (LSHS) falling within Chapter 27 of the said First Schedule used in the generation of electricity;
(iii) Naphtha (RN) falling within Chapter 27 of the said First Schedule used in the manufacture of fertilizer;
[OMITTED-
(iv) tyres of a kind used on animal drawn vehicles or handcarts and their tubes, falling within Chapter 40 of the said First Schedule;]
(v) newsprint, in rolls or sheets, falling within heading No.48.01 of the said First Schedule;
(vi) final products falling within Chapters 50 to 63 of the said First Schedule, the manufacturer shall pay an amount equivalent to the CENVAT credit attributable to inputs used in, or in relation to, the manufacture of such final products at the time of their clearance from the factory; or

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

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


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

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

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

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


(Sub-clause (iv) omitted and (vii) & (viii) inserted vide Ntf. No. 13/2003-CE(NT), DT. 01/03/2003)

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

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

Explanation II.- If the manufacturer fails to pay the said amount, it shall be recovered along with interest in the same manner, as provided in rule 12, for recovery of CENVAT credit wrongly taken.

(Pl. refer Cir. No. 654/45/2002-CX, Dt. 19/08/2002 for Availment of Cenvat/Modvat credit when common inputs are used for both dutiable and exempted products)

(4) No CENVAT credit shall be allowed on capital goods which are used exclusively in the manufacture of exempted goods, 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) The provisions of sub- rule (1), sub-rule (2), sub-rule (3) and sub-rule (4) shall not be applicable in case the exempted goods are either-

(i) cleared to a unit in a free trade zone; or
(ii) cleared to a unit in a special economic zone; or
(iii) cleared to a hundred per cent. export-oriented undertaking; or
(iv) cleared to a unit in an Electronic Hardware Technology Park or Software Technology Park; or
(v) supplied to the United Nations or an international organization for their official use or supplied to projects funded by them, 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 28 th August, 1995, number G. S R. 602 (E), dated the 28 th August, 1995; or
(vi) cleared for export under bond in terms of the provisions of the Central Excise Rules, 2002.

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

(clause (vii) has been inserted vide Ntf. No. 13/2003-CE(NT), DT. 01/03/2003)

6A. Storage of inputs outside the factory of the manufacturer: The Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise 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 inputs 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 inputs are not used in the manner prescribed 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 inputs.

(Above Rule 6A has beeb inserted vide Ntf. No. 13/2003-CE(NT), DT. 01/03/2003)

(Pl. refer Ntf. No. 49/2002-CE, Dt. 16/09/2002 for Dutiable and exempted final products, after discharging )

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