In order to remove the cascading effect of excise duty and service tax, the Excise Duty paid on the inputs, capital goods and input services, which are used in or in relation to the manufacture of final product or for providing output services is permissible to be set-off against the excise duty liability on the final products or paying service tax under the CENVAT Credit Rules, 2004. These rules have been notified to regulate the availment and utilization of the CENVAT credit.

Eligible documents for claiming CENVAT Credit :

  • Original or Duplicate Invoice,
  • Dealer’s Invoice,
  • Bill of Entry,
  • Supplementary Invoice,
  • A certificate issued by an appraiser of customs in respect of goods imported through a Foreign Post Office,
  • A challan evidencing payment of service tax by the person liable to pay service tax under sub-clauses (iii) and (v) of clause (d) of sub-rule (1) of rule (2) of the Service Tax Rules, 1944,
  • An invoice, bill or challans issued by an input service distributor under rule 4A of the Service Tax Rules, 1994.
  • CENVAT Credit on following Inputs & Input services not allowed :
  • Goods on which 1% excise duty is paid [proviso to Rule 3(i)].
  • Goods and services used for civil construction are not eligible, except when used for construction itself.
  • Rent-a-cab service, Insurance of Motor Vehicles, Repair of Motor Vehicles not eligible, except where Motor Vehicle is eligible as ‘capital goods’
  • Architect and Construction services for building, civil structure, laying of foundation or structures for capital goods – except when used for construction itself
  • Canteen, Club Membership of Employees, Insurance of Employees, LTA of Employees – not eligible
  • Availability of CENVAT Credit of Service Tax :
  • In respect of invoices on or after 1-4-2011, credit can be taken on receipt of invoice, but if payment is not made to service provider within 3 months, credit is to be reversed [Rule 4(7) of CENVAT Credit Rules,2004 as amended w.e.f. 1-4-2011]
  • However, CENVAT Credit on invoice of service tax issued prior to April 1,2011, will be available on actual payment basis.
  • A manufacturer or a service provider shall take credit on inputs and input services within a period ofOne year from the date of issue of invoice, bill or challan. Thus, the decisions in case of Central Bank of India [2012-TIOL-1314-CESTAT-MAD] holding that there is no time limit for taking Cenvat Credit shall no longer help assessee in availing long forgotten credit.
  • In case of service tax paid under full reverse charge, the condition of payment of invoice value to the service provider for availing credit of input services is being withdrawn. However, there is no change in respect of partial reverse charge.