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Small Scale Industries (SSI) and Small Service Providers (SSP) - Transitional provision - Claiming the benefit of exemption after availing the Cenvat Credit - Cenvat Credit - Ready Reckoner - Cenvat Credit

Small Scale Industries (SSI) and Small Service Providers (SSP) - Transitional provision - Claiming the benefit of exemption after availing the Cenvat Credit
  • Contents

Chapter 10

Small Scale industries and Small Service Providers

Transitional provision - Claiming the benefit of exemption after availing the Cenvat Credit

Statutory Provisions:

Rule 11 and 3(2) of the Cenvat Credit Rules, 2004

Rule 11(2) - Reversal of Cenvat Credit in case of SSI unit starts availing Value Based Exemption.

Rule 3(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.

Rule 11(3) - Reversal of Cenvat Credit in case of a Manufacture avails Exemption from whole of duty after availing the Cenvat Credit

Rule 11(4) - Reversal  of Cenvat Credit in case of a Service Provider avails Exemption from whole of service tax after availing the Cenvat Credit

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Part A: - Small Scale Industries (SSI) - Excise

A unit who choose to avail SSI Exemption

A special provision (transitional provision) has been inserted in the Cenvat Credit Rules as rule 11(2) for the units who opts out from the Cenvat Credit and availing the exemption of SSI (i.e. exemption based on value of clearance).

A unit which was availing Cenvat Credit and paying excise duty earlier and availing SSI exemption later on has the following two situation: -

· There may be some balance in Cenvat Credit account

A unit who intends to come out from the excise net by availing SSI exemption shall not be entitled to use the Cenvat Credit further and all the balance remaining in the account shall lapse, except balance on account of capital goods.

Therefore, the balance lying in the Cenvat Credit at the time of opting out from the Cenvat Credit shall neither be refundable nor be adjustable.

·Good on which Cenvat credit has been availed lying in stock.

It may happen that at the time of opting out there may be some stock of input lying in the stock room or shop floor or in the form of work in progress or semi finished goods or finished goods and on which Cenvat Credit has been availed. In such cases, such unit should prepare an inventory of all the goods lying in the stock involving input on which Cenvat Credit has been availed along with the details of amount of Cenvat Credit availed.

After, preparation of such inventory and detail of credit, an amount equal to such credit shall be reversed. If there is insufficient balance in the Cenvat Credit account, then the balance shall be paid through PLA.

A unit who starts paying excise duty after availing exemption

A manufacturer or producer of the finished goods, who was availing exemption earlier and intends to pay excise duty, has to follow the prescribe procedure to avail Cenvat Credit on the input lying in stock:

Prepare an inventory of duty paid inputs lying in the stock or in processes or inputs contained in the final products lying in the stock along with the Cenvat Credit involved therein.

On the basis of such detail, he can avail the Cenvat Credit equal to amount of duty involved in the inputs lying in the stock. For this purpose he is required to proper documentary evidence and records.

Further, for this purpose, there is no requirement to submit any declaration or intimation or to obtain permission to or from the department.

Further, the facility of availing Cenvat on inputs lying in stock is not available for input services.

No reversal of credit availed on Capital goods and Input Services

A manufacturer is not required to reverse Cenvat Credit availed on Capital Goods and Input Services which are still unutilized. However, balance of Cenvat Credit on account of Input services shall lapse whereas balance of Cenvat Credit on account of Capital Goods can be utilized later on when he starts paying excise duty on the finished goods manufactured by him.

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Part B: - Small Service Providers (SSP) - Service Tax

A service provider who choose to avail SSP Exemption

There is no special provision (transitional provision) for a service provider availing value based exemption (i.e. Notification no. 33/2012 dated 20-6-2012 w.e.f. 1-7-2012) corresponding to rule 11(2) as in the case of manufacturer.

However, similar provisions have been inserted in the exemption notification itself. Accordingly a service provider availing Cenvat Credit and paying service tax earlier with availing Cenvat Credit on inputs and availing exemption up to ₹ 10 lakh later on has the following two situation: -

There may be some balance in Cenvat Credit account

A SSP who intends to come out from the service tax net by availing exemption shall not be entitled to use the Cenvat Credit further and all the balance remaining in the account shall lapse except balance on account of Capital Goods.

Therefore, the balance lying in the Cenvat Credit at the time of opting out from the Cenvat Credit shall neither be refundable nor be adjustable.

Good on which Cenvat credit has been availed lying in stock.

It may happen that at the time of opting out there may be some stock of input lying in the stock room or in the process  and on which Cenvat Credit has been availed. In such cases, such unit should prepare an inventory of all the goods lying in the stock involving input on which Cenvat Credit has been availed along with the details of amount of Cenvat Credit availed.

After, preparation of such inventory and detail of credit, an amount equal to such credit shall be reversed. If there is insufficient balance in the Cenvat Credit account, then the balance shall be paid through TR-6 challan..

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Part C:

A unit who starts paying service tax after availing exemption

A service provider who was availing exemption can not avail the Cenvat Credit of duty paid on the inputs lying in stock at the time when he starts paying service tax.

This facility of availing Cenvat credit on the goods lying in stock is available to Manufacturer only.

 

No reversal of credit availed on Capital goods and Input Services

A service provider is not required to reverse Cenvat Credit availed on Capital Goods and Input Services which are still unutilized. However, balance of Cenvat Credit on account of Input services shall lapse whereas balance of Cenvat Credit on account of Capital Goods can be utilized later on when he starts paying service tax on the output services provided by him.

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Part D:- Special provision in case of Manufacture who opt to avail exemption from whole of duty under a Notification

When 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

the said final product has been exempted absolutely under section 5A of the Act

-  As per Rule 11(3) a manufacturer is required to 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 there remains any balance, the same shall lapse - will not be used for any purpose in future.

 

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Part D:- Special provision in case of Service Provider who opt to avail exemption from whole of service tax under a Notification

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)

-  As per Rule 11(4) a service provider is 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.

-  If there remains any balance, the same shall lapse - will not be used for any purpose in future.

 
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