Cenvat Credit Rules

• All the amendments are effective from 1-4-2012, except otherwise specified.
• Following services are excluded from definition of ‘input service’ only so far as they relate to a motor vehicle, which is not a capital goods – (a) Renting of a cab (b) Supply of tangible goods.  However, these services will be eligible as ‘input services’ if used for provision of taxable services for which Cenvat credit of motor vehicle is available as capital goods [rule 2(l) clause (B) amended w.e.f. 1-4-2012]
• Following services are excluded from definition of ‘input service’, except when used by (a) a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by him or (b) provided by general insurance company [as specified in section 65(105) of the Finance Act], in respect of a motor vehicle insured or reinsured by him - (a) General Insurance Services (b) Motor vehicle related service (earlier termed as Authorised Service Station service) [rule 2(l) clause (BA) inserted w.e.f. 1-4-2012]. Note - There seems to be clear drafting mistake. Till 1-4-2012, general insurance services were allowable in all cases except where used for motor vehicle related services. Now, they are not eligible except in aforesaid cases. This does not seem to be intention at all.
• Rule 5 of Central Excise Rules amended to provide simplified method for refund of unutilised Cenvat credit on account of exports [It should be clarified that refund provision applies only if assessee has excess Cenvat credit. Otherwise, department is likely to take a view that in case of all exports, assessee cannot utilise Cenvat credit for DTA sales and must go for refund procedure only].
• Cenvat Credit allowable on excise duty paid on motor vehicles (except under heading Nos. 8702, 8702, 8704, 8711 and their chassis) to manufacturers. The excluded chapter heads are relating to motor vehicles for transport of 10 or more persons (including driver), motor cars, station wagons, tor vehicles for transport of goods and motor cycles.
• The Cenvat credit of excise duty paid motor vehicles covered under headings 8702, 8703, 8704 and 8711 and their chassis is available only to specified service providers e.g. Courier, Tour operator, Rent-a-cab scheme operator, Cargo Handling Agency, Goods Transport agency, Outdoor caterer and Pandal or shamiana contractor as per earlier provisions.
• In effect, Cenvat credit is available only in respect of excise duty paid on tractors, special purpose motor vehicles,  work trucks, bicycles, baby carriages and trailers and parts and accessories of all motor vehicles  to the manufacturers.
• Removal of capital goods after use as second hand or scrap -  ‘Amount’ payable on basis of Cenvat credit taken as reduced @ 2.5% per quarter or on transaction value,whichever is higher [Rule 3(5A) as amended w.e.f. 17-3-2012]
• The ‘amount’ payable under rule 6(3) [where assessee is manufacturer of excisable as well as exempt goods or provider of taxable as well as exempt services] has been increased from 5% to 6% w.e.f. 1-4-2012.
• Restriction of 20% on Cenvat credit on insurance company removed [Rule 6(3C) omitted w.e.f. 1-4-2012]
• Cenvat Credit of special additional duty (SAD) of 4% can be transferred from one unit to other unit of same manufacturer [Rule 10A of Cenvat Credit Rules w.e.f. 1-4-2012]
• Interest is not payable on wrongly taken Cenvat credit if it was not utilised [Rule 14 amended] (very sensible amendment indeed)
• Inputs or capital goods need not be brought in the premises of service provider  [Even otherwise, this was not a practical provision. Further, the word ‘premises’ were never defined.  Thus, any place where assessee is providing service would be ‘premises’ of service provider].
• Input Service Provider to distribute credit on following basis - (a) Credit of service tax attributable to wholly exempted goods or exempted services shall not be distributed (b) In case of service tax attributable to a particular unit - directly to that unit (c) In case of common input services - on basis of turnover of each unit [Rule 7 of Cenvat Credit Rules overhauled]
• Cenvat Credit Reversal not required if exempted taxable service provided to SEZ - retrospective amendment w.e.f. 16-6-2005 [clause  144 of Finance Bill, 2012].