RULE 57AD. Obligation of manufacturer of dutiable and exempted goods

(1) 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).

(2) Where a manufacturer avails of CENV A T 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 CENV AT credit only on that quantity of inputs which is intended for use in the manufacture of dutiable goods. 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) final products falling under Chapters 50 to 63 of the Schedule to the Central Excise Tariff Act, 1985;
(ii) tyres of a kind used on animal drawn vehicles or handcarts and their tubes, falling within Chapter 40;
(iii) black and white television sets, falling within Chapter 85;
(iv) newsprint, in rolls or sheets, falling within Chapter heading No. 48.01,the manufacturer shall pay an amount equivalent to the CENV A T 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

(b) if the exempted goods are other than those described in clause (a) above, 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. -The amount mentioned in (a) and (b) above shall be paid by the manufacturer by debiting the CENV AT credit or otherwise.

(3) No credit of the specified duty shall be allowed on capital goods, which are used exclusively in the manufacture of exempted goods (other than 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).

(4) The provisions of sub- rule (1), sub-rule (2) and sub-rule (3) 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 hundred per cent Export-oriented undertaking; or
(iii) cleared to a unit in an Electronic Hardware Technology Park or Software Technology Parks; or
(iv) supplied to the United Nations or an international organisation 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 Excises, dated 28th August, 1995; or
(v) cleared for export under bond in terms of the provisions of rule 13.

(Pl. refere Cir. No. 624/15/2002-CX., DT. 28-2-2002)