Service Tax Specialist

Short title and commencement.

1. (1) These rules may be called the Service Tax Rules, 1994.

(2) They shall come into force on the 1st day of July, 1994.

 

Definitions.

2. (1) In these rules, unless the context otherwise requires,—

      (a)  “Act” means the Finance Act, 1994 (32 of 1994) ;

   ¹[(b)  “assessment” includes self-assessment of service tax by the assessee, reassessment, provisional assessment, best judgment assessment and any order of assessment in which the tax assessed is nil; determination of the interest on the tax assessed or reassessed;]

      (c)  “Form” means a form appended to these rules;

  ²[(cc)  “half-year” means the period between 1st April to 30th September or 1st October to 31st March of a financial year;]

³[ (ccc)  “input service distributor” has the meaning assigned to it in clause (m) of rule 2 of the CENVAT Credit Rules, 2004;]

⁴[ (cccc) “large taxpayer” shall have the meaning assigned to it in the Central Excise Rules, 2002.]

   ⁵[(d)  “person liable for paying the service tax” means,—

       (i)  in relation to ⁶[telecommunication service],—

      (a)  the Director General of Posts and Telegraphs, referred to in clause (6) of section 3 of the Indian Telegraph Act, 1885 (13 of 1885); or

      (b)  the Chairman-cum-Managing Director, Mahanagar Telephone Nigam Limited, Delhi, a company registered under the Companies Act, 1956  (1 of 1956); or

      (c)  any other person who has been granted a licence by the Central Government under the first proviso to sub-section (1) of section 4 of the Indian Telegraph Act, 1885 (13 of 1885);

   ⁷[(ii)  in relation to general insurance business, the insurer or re-insurer, as the case may be, providing such service;]

   ⁸[(iii)  in relation to insurance auxiliary service by an insurance agent, any person carrying on the general insurance business or the life insurance business, as the case may be, in India;]

  ⁹[(iv)  in relation to any taxable service provided or to be provided by any person from a country other than India and received by any person in India under section 66A of the Act, the recipient of such service;]

  ¹⁰[(v)  in relation to taxable service provided by a goods transport agency, where the consignor or consignee of goods is,—

      (a)  any factory registered under or governed by the Factories Act, 1948 (63 of 1948);

      (b)  any company ¹¹[formed or registered under] the Companies Act, 1956 (1 of 1956);

      (c)  any corporation established by or under any law;

      (d)  any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India;

      (e)  any co-operative society established by or under any law;

       (f)  any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder; or

      (g)  any body corporate established, or a partnership firm registered, by or under any law,

            any person who pays or is liable to pay freight either himself or through his agent for the transportation of such goods by road in a goods carriage;]

¹²[(vi)  in relation to business auxiliary service of distribution of mutual fund by a mutual fund distributor or an agent, as the case may be, the mutual fund or asset management company, as the case may be, receiving such service;]

¹³[(vii)  in relation to sponsorship service provided to any body corporate or firm located in India, the body corporate or, as the case may be the firm who receives such sponsorship service;]

  ¹⁴[(e)  “quarter” means the period between 1st January to 31st March or 1st April to 30th June or 1st July to 30th September or 1st October to 31st December of a financial year.]

(2) All words and expressions used but not defined in these rules but defined in the Central Excise Act, 1944 (1 of 1944), ¹⁵[and the rules made thereunder shall have the meanings assigned to them in that Act and rules].

 

Appointment of officers.

3. The Central Board of Excise and Customs may appoint such Central Excise Officers as it thinks fit for exercising the powers under Chapter V of the Act within such local limits as it may assign to them as also specify the taxable service in relation to which any such Central Excise Officer shall exercise his powers.

 

¹⁶[Registration.

4. (1) Every person liable for paying the service tax shall make an application to the ¹⁷[concerned Superintendent of Central Excise] in Form ST-1 for registration within a period of thirty days from the date on which the service tax under section 66 of the Finance Act, 1994 (32 of 1994) is levied :

Provided that where a person commences the business of providing a taxable service after such service has been levied, he shall make an application for registration within a period of thirty days from the date of such commencement :

¹⁸[Provided further that a person liable for paying the service tax in the case of taxable services referred to in sub-section (4) or sub-section (5) of section 66 of the Finance Act, 1994 (32 of 1994) may make an application for registration on or before the 31st day of December, 1998:]

¹⁹[Provided also that a person liable for paying the service tax in the case of taxable services referred to in sub-clause (zzp) of clause (105) of section 65 of the Act may make an application for registration on or before the ²⁰[31st day of March, 2005.]

²¹[***]

²²[(2) Where a person, liable for paying service tax on a taxable service,

     (i)  provides such service from more than one premises or offices; or

    (ii)  receives such service in more than one premises or offices; or

   (iii)  is having more than one premises or offices, which are engaged in relation to such service in any other manner, making such person liable for paying service tax,

and has centralised billing system or centralised accounting system in respect of such service, and such centralised billing or centralised accounting systems are located in one or more premises, he may, at his option, register such premises or offices from where centralised billing or centralised accounting systems are located.

(3) The registration under sub-rule (2), shall be granted by the Commissioner of Central Excise in whose jurisdiction the premises or offices, from where centralised billing or accounting is done, are located:

Provided that nothing contained in this sub-rule shall have any effect on the registration granted to the premises or offices having such centralised billing or centralised accounting systems, prior to the 2nd day of November, 2006.]

²³[(3A) Where an assessee is providing a taxable service from more than one premises or offices, and does not have any centralized billing systems or centralized accounting systems, as the case may be, he shall make separate applications for registration in respect of each of such premises or offices to the jurisdictional Superintendent of Central Excise.]

(4) Where an assessee is providing more than one taxable service, he may make a single application, mentioning therein all the taxable services provided by him, to the concerned ²⁴[Superintendent of Central Excise].

(5) The ²⁴[Superintendent of Central Excise] shall after due verification of the application form ²⁵[or an intimation under sub-rule (5A), as the case may be], grant a certificate of registration in Form ST-2 within seven days from the date of receipt of the application ²⁵[or the intimation]. If the registration certificate is not granted within the said period, the registration applied for shall be deemed to have been granted.

²⁶[(5A) Where there is a change in any information or details furnished by an assessee in Form ST-1 at the time of obtaining registration or he intends to furnish any additional information or detail, such change or information or details shall be intimated, in writing, by the assessee, to the jurisdictional Assistant Commissioner or Deputy Commissioner of Central Excise, as the case may be, within a period of thirty days of such change.]

(6) Where a registered assessee transfers his business to another person, the transferee shall obtain a fresh certificate of registration.

(7) Every registered assessee, who ceases to provide the taxable service for which he is registered, shall surrender his registration certificate immediately ²⁶[to the Superintendent of Central Excise].]

²⁶[(8) On receipt of the certificate under sub-rule (7), the Superintendent of Central Excise shall ensure that the assessee has paid all monies due to the Central Government under the provisions of the Act, and the rules and the notifications issued thereunder, and thereupon cancel the registration certificate.]

 

²⁷[Taxable service to be provided or credit to be distributed on invoice, bill or challan.

4A. (1) Every person providing taxable service ²⁸[, not later than fourteen days from the date of completion of such taxable service or receipt of any payment towards the value of such taxable service, whichever is earlier,] shall issue an invoice, a bill or, as the case may be, a challan signed by such person or a person authorized by him in respect of ²⁸[such] taxable service provided or to be provided and such invoice, bill or, as the case may be, challan shall be serially numbered and shall contain the following, namely:—

     (i)  the name, address and the registration number of such person;

    (ii)  the name and address of the person receiving taxable service;

   (iii)  description, classification and value of taxable service provided or to be provided; and

   (iv)  the service tax payable thereon :

²⁹[Provided that in case the provider of taxable service is a banking company or a financial institution including a non-banking financial company, or any other body corporate or ³⁰[any other person], providing service to a customer, in relation to banking and other financial services, an invoice, a bill or, as the case may be, challan shall include any document, by whatever name called, whether or not serially numbered, and whether or not containing address of the person receiving taxable service but containing other information in such documents as required under this sub-rule :]

³¹[Provided further that in case the provider of taxable service is a goods transport agency, providing service to a customer, in relation to transport of goods by road in a goods carriage, an invoice, a bill or, as the case may be, a challan shall include any document, by whatever name called, which shall contain the details of the consignment note number and date, gross weight of the consignment and also contain other information as required under this sub-rule :]

³²[Provided also that where any payment towards the value of taxable service is not received and such taxable service is provided continuously for successive periods of time and the value of such taxable service is determined or payable periodically, an invoice, a bill, or as the case may be, a challan shall be issued by a person providing such taxable service, not later than fourteen days from the last day of the said period.]

(2) Every input service distributor distributing credit of taxable services shall, in respect of credit distributed, issue an invoice, a bill or, as the case may be, a challan signed by such person or a person authorized by him, for each of the recipient of the credit distributed, and such invoice, bill or, as the case may be, challan shall be serially numbered and shall contain the following, namely:—

     (i)  the name, address and registration number of the person providing input services and the serial number and date of invoice, bill, or as the case may be, challan issued under sub-rule (1);

    (ii)  the name *and address of the said input service distributor;

   (iii)  the name and address of the recipient of the credit distributed;

   (iv)  the amount of the credit distributed :]

³³[Provided that in case the input service distributor is an office of a banking company or a financial institution including a non-banking financial company, or any other body corporate or ³⁴[any other person], providing service to a customer, in relation to banking and other financial services, an invoice, a bill or, as the case may be, challan shall include any document, by whatever name called, whether or not serially numbered but containing other information in such documents as required under this sub-rule.]

 

³⁵[Issue of consignment note.

4B. Any goods transport agency which provides service in relation to transport of goods by road in a goods carriage shall issue a consignment note to the customer :

Provided that where any taxable service in relation to transport of goods by road in a goods carriage is wholly exempted under section 93 of the Act, the goods transport agency shall not be required to issue the consignment note.

Explanation.—For the purposes of this rule and the second proviso to rule 4A, “consignment note” means a document, issued by a goods transport agency against the receipt of goods for the purpose of transport of goods by road in a goods carriage, which is serially numbered, and contains the name of the consignor and consignee, registration number of the goods carriage in which the goods are transported, details of the goods transported, details of the place of origin and destination, person liable for paying service tax whether consignor, consignee or the goods transport agency.]

 

Records.

5. (1) The records *including computerised data as maintained by an assessee in accordance with the various laws in force from time to time shall be acceptable.

³⁶[(2) Every assessee shall furnish to the Superintendent of Central Excise at the time of filing of return for the first time or the 31st day of January, 2008, whichever is later, a list in duplicate, of—

   (i)  all the records prepared or maintained by the assessee for accounting of transactions in regard to,

  (a)  providing of any service, whether taxable or exempted;

  (b)  receipt or procurement of input services and payment for such input services;

  (c)  receipt, purchase, manufacture, storage, sale, or delivery, as the case may be, in regard of inputs and capital goods;

  (d)  other activities, such as manufacture and sale of goods, if any.

  (ii)  all other financial records maintained by him in the normal course of business.]

³⁷[(3) All such records shall be preserved at least for a period of five years immediately after the financial year to which such records pertain.

(4) ³⁸[* * *]

 

^36a[Access to a registered premises.

5A.(1) An officer authorised by the Commissioner in this behalf shall have access to any premises registered under these rules for the purpose of carrying out any scrutiny, verification and checks as may be necessary to safeguard the interest of revenue.

(2) Every assessee shall, on demand, make available to the officer authorised under sub-rule (1) or the audit party deputed by the Commissioner or the Comptroller and Auditor General of India, within a reasonable time not exceeding fifteen working days from the day when such demand is made, or such further period as may be allowed by such officer or the audit party, as the case may be,—

           (i)  the records as mentioned in sub-rule (2) of rule 5;

          (ii)  trial balance or its equivalent; and

         (iii)  the income-tax audit report, if any, under section 44AB of the Income-tax Act, 1961 (43 of 1961), for the scrutiny of the officer or audit party, as the case may be.]

 

⁴⁰[Payment of service tax.

6. ^41-42[(1) The service tax shall be paid to the credit of the Central Government,—

   (i)  by the 6th day of the month, if the duty is deposited electronically through internet banking; and

  (ii)  by the 5th day of the month, in any other case,

immediately following the calendar month in which the payments are received, towards the value of taxable services :

Provided that where the assessee is an individual or proprietary firm or partnership firm, the service tax shall be paid to the credit of the Central Government by the 6th day of the month if the duty is deposited electronically through internet banking, or, in any other case, the 5th day of the month, as the case may be, immediately following the quarter in which the payments are received, towards the value of taxable services :

Provided further that notwithstanding the time of receipt of payment towards the value of services, no service tax shall be payable for the part or whole of the value of services, which is attributable to services provided during the period when such services were not taxable :

Provided also that the service tax on the value of taxable services received during the month of March, or the quarter ending in March, as the case may be, shall be paid to the credit of the Central Government by the 31st day of March of the calendar year.]

^42a[(1A) Without prejudice to the provisions contained in sub-rule (1), every person liable to pay service tax, may, on his own volition, pay an amount as service tax in advance, to the credit of the Central Government and adjust the amount so paid against the service tax which he is liable to pay for the subsequent period:

Provided that the assessee shall,—

   (i)  intimate the details of the amount of service tax paid in advance, to the jurisdictional Superintendent of Central Excise within a period of fifteen days from the date of such payment; and

  (ii)  indicate the details of the advance payment made, and its adjustment, if any in the subsequent return to be filed under section 70 of the Act.]

(2) The assessee shall deposit the service tax liable to be paid by him with the bank designated by the Central Board of Excise and Customs for this purpose in Form TR-6 or in any other manner prescribed by the Central Board of Excise and Customs :

⁴³[Provided that the assessee, who has paid service tax of rupees fifty lakh or above in the preceding financial year or has already paid service tax of rupees fifty lakh in the current financial year, shall deposit the service tax liable to be paid by him electronically, through internet banking.]

⁴⁴[(2A) For the purpose of this rule, if the assessee deposits the service tax by cheque, the date of presentation of cheque to the bank designated by the Central Board of Excise and Customs for this purpose shall be deemed to be the date on which service tax has been paid subject to realization of that cheque.]

(3) Where an assessee has paid to the credit of Central Government service tax in respect of a taxable service, which is not so provided by him either wholly or partially for any reason, the assessee may adjust the excess service tax so paid by him (calculated on a pro rata basis) against his service tax liability for the subsequent period, if the assessee has refunded the value of taxable service and the service tax thereon to the person from whom it was received.

⁴⁵[(4) Where an assessee is, for any reason, unable to correctly estimate, on the date of deposit, the actual amount payable for any particular month or quarter, as the case may be, he may make a request in writing to the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, giving reasons for payment of service tax on provisional basis and the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, on receipt of such request, may allow payment of service tax on provisional basis on such value of taxable service as may be specified by him and the provisions of the Central Excise  (No. 2) Rules, 2001, relating to provisional assessment except so far as they relate to execution of bond, shall, so far as may be, apply to such assessment.]

⁴⁶[(4A) Notwithstanding anything contained in sub-rule (4), where an assessee has paid to the credit of Central Government any amount in excess of the amount required to be paid towards service tax liability for a month or quarter, as the case may be, the assessee may adjust such excess amount paid by him against his service tax liability for the succeeding month or quarter, as the case may be.

(4B) The adjustment of excess amount paid, under sub-rule (4A), shall be subject to the following conditions, namely:—

   (i)  excess amount paid is on account of reasons not involving interpretation of law, taxability, classification, valuation or applicability of any exemption notification,

  (ii)  excess amount paid by an assessee registered under sub-rule (2) of rule 4, on account of delayed receipt of details of payments towards taxable services may be adjusted without monetary limit,

(iii)  in cases other than specified in clause (ii) above, the excess amount paid may be adjusted with a monetary limit ^46a[one lakh rupees] for a relevant month or quarter, as the case may be,

(iv)  the details and reasons for such adjustment shall be intimated to the jurisdictional Superintendent of Central Excise within a period of fifteen days from the date of such adjustment.]

⁴⁷[(4C) Notwithstanding anything contained in sub-rules (4), (4A) and (4B), where the person liable to pay service tax in respect of services provided or to be provided in relation to renting of immovable property, referred to in sub-clause (zzzz) of clause (105) of section 65 of the Act, has paid to the credit of Central Government any amount in excess of the amount required to be paid towards service tax liability for a month or quarter, as the case may be, on account of non-availment of deduction of property tax paid in terms of Notification No. 24/2007-Service Tax, dated the 22nd May, 2007, from the gross amount charged for renting of the immovable property for the said period at the time of payment of service tax, the assessee may adjust such excess amount paid by him against his service tax liability within one year from the date of payment of such property tax. The details of such adjustment shall be intimated to the Superintendent of Central Excise having jurisdiction over the service provider within a period of fifteen days from the date of such adjustment.]

(5) Where an assessee under sub-rule (4) requests for a provisional assessment he shall file a statement giving details of the difference between the service tax deposited and the service tax liable to be paid for each month in a memorandum in Form ST-3A accompanying the quarterly or half-yearly return, as the case may be.

(6) Where the assessee submits a memorandum in Form ST-3A under sub-rule (5), it shall be lawful for the ⁴⁸[Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be,] to complete the assessment, wherever he deems it necessary, after calling such further documents or records as he may consider necessary and proper in the circumstances of the case.

Explanation.— For the purposes of this rule and rule 7, “Form TR-6” means a memorandum or challan referred to in rule 92 of the Treasury Rules of the Central Government.

(7) The person liable for paying the service tax in relation to the services provided by an air travel agent, shall have the option, to pay an amount calculated at the rate of ⁴⁹[0.6%] of the basic fare in the case of domestic bookings, and at the rate of ⁵⁰[1.2%]  of the basic fare in the case of international bookings, of passage for travel by air, during any calendar month or quarter, as the case may be, towards the discharge of his service tax liability instead of paying service tax ⁵¹[at the rate specified in section 66 of Chapter V of the Act]  and the option, once exercised, shall apply uniformly in respect of all the bookings of passage for travel by air made by him and shall not be changed during a financial year under any circumstances.

Explanation.—For the purposes of this sub-rule, the expression “basic fare” means that part of the air fare on which commission is normally paid to the air travel agent by the airline.

⁵²[(7A) An insurer carrying on life insurance business liable for paying the service tax in relation to the risk cover in life insurance provided to a policy holder shall have the option to pay an amount calculated at the rate of one per cent of the gross amount of premium charged by such insurer towards the discharge of his service tax liability instead of paying service tax at the rate specified in section 66 of Chapter V of the Act:

Provided that such option shall not be available in cases where—

    (a)  the entire premium paid by the policy holder is only towards risk cover in life insurance; or

    (b)  the part of the premium payable towards risk cover in life insurance is shown separately in any of the documents issued by the insurer to the policy holder.]

(8) ⁵³[***]

(9) ⁵⁴[***]

 

⁵⁵[Returns.

7. (1) Every assessee shall submit a half-yearly return in Form ‘ST-3’ or ‘ST-3A’, as the case may be, along with a copy of the Form TR-6, in triplicate for the months covered in the half-yearly return.

(2) Every assessee shall submit the half-yearly return by the 25th of the month following the particular half-year.

(3) and (4) ⁵⁶[Omitted by the Service Tax (Amendment) Rules, 2001, w.e.f. 16-7-2001].

 

⁵⁷[Returns in case of taxable service provided by goods transport operators and clearing and forwarding agents.

7A. Notwithstanding anything contained in rule 7, an assessee, in case of service provided by—

    (a)  goods transport operator for the period commencing on and from the 16th day of November, 1997 to 2nd day of June, 1998; and

    (b)  clearing and forwarding agents for the period commencing on and from the 16th day of July, 1997 to 16th day of October, 1998,

shall furnish a return within a period of six months from the 13th day of May, 2003, in Form ST-3B alongwith copy of Form TR-6 in triplicate, failing which the interest and penal consequences as provided in the Act shall follow.]

 

⁵⁸[Revision of Return.

7B. An assessee may submit a revised return, in Form ST-3, in triplicate, to correct a mistake or omission, within a period of ^58a[ninety] days from the date of submission of the return under rule 7.

Explanation.—Where an assessee submits a revised return, the “relevant date” for the purpose of recovery of service tax, if any, under section 73 of the Act shall be the date of submission of such revised return.]

 

⁵⁹[Amount to be paid for delay in furnishing the prescribed return.

7C. Where the return prescribed under rule 7 is furnished after the date prescribed for submission of such return, the person liable to furnish the said return shall pay to the credit of the Central Government, for the period of delay of—

   (i)  fifteen days from the date prescribed for submission of such return, an amount of five hundred rupees;

  (ii)  beyond fifteen days but not later than thirty days from the date prescribed for submission of such return, an amount of one thousand rupees; and

(iii)  beyond thirty days from the date prescribed for submission of such return an amount of one thousand rupees plus one hundred rupees for every day from the thirty first day till the date of furnishing the said return:

Provided that the total amount payable in terms of this rule, for delayed submission of return, shall not exceed the amount specified in section 70 of the Act:

Provided further that where the assessee has paid the amount as prescribed under this rule for delayed submission of return, the proceedings, if any, in respect of such delayed submission of return shall be deemed to be concluded:

^59a[Provided also that where the gross amount of service tax payable is nil, the Central  Excise Officer may, on being satisfied that there is sufficient reason for not filing the return, reduce or waive the penalty.]

Explanation.—It is hereby declared that any pending proceedings under section 77 for delayed submission or non-submission of return that has been initiated before the date on which the Finance Bill, 2007 receives the assent of the President, shall also be deemed to be concluded if the amount specified for delay in furnishing the return is paid by the assessee within sixty days from the date of assent to the said Finance Bill.]

 

Form of appeals to ⁶⁰[Commissioner] of Central Excise (Appeals).

8. (1) An appeal under section 85 of the Act to the ⁶⁰[Commissioner] of Central Excise (Appeals) shall be in Form ST-4.

(2) The appeal shall be filed in duplicate and shall be accompanied by a copy of order appealed against.

 

⁶¹[Form of appeals to Appellate Tribunal.

9. (1) An appeal under sub-section (1) of section 86 of the Act to the Appellate Tribunal shall be made in Form ST-5 in quadruplicate and shall be accompanied by a copy of the order appealed against (one of which shall be a certified copy).

⁶²[(2) An appeal under sub-section (2) of section 86 of the Act to the Appellate Tribunal shall be made in Form ST-7 in quadruplicate and shall be accompanied by a copy of the order of the Commissioner of Central Excise (one of which shall be a certified copy) and a copy of the order passed by the Central Board of Excise and Customs directing the Commissioner of Central Excise to apply to the Appellate Tribunal.

(2A) An appeal under sub-section (2A) of section 86 of the Act to the Appellate Tribunal shall be made in Form ST-7 in quadruplicate and shall be accompanied by a copy of the order of the Commissioner of Central Excise (Appeals) (one of which shall be a certified copy) and a copy of the order passed by the Commissioner of Central Excise directing the Assistant Commissioner of Central Excise or as the case may be, the Deputy Commissioner of Central Excise to apply to the Appellate Tribunal; and]

(3) A memorandum of cross-objections under sub-section (4) of section 86 of the Act, shall be made in Form ST-6 in quadruplicate.]

 

⁶³[Procedure and facilities for large taxpayer.

10. Notwithstanding anything contained in these rules, the following shall apply to a large taxpayer,—

(1) A large taxpayer shall submit the returns, as prescribed under these rules, for each of the registered premises.

Explanation : A large taxpayer who has obtained a centralized registration under sub-rule (2) of rule 4, shall submit a consolidated return for all such premises.

(2) A large taxpayer, on demand, may be required to make available the financial, stores and CENVAT credit records in electronic media, such as, compact disc or tape for the purposes of carrying out any scrutiny and verification, as may be necessary.

(3) A large taxpayer may, with intimation of at least thirty days in advance, opt out to be a large taxpayer from the first day of the following financial year.

(4) Any notice issued but not adjudged by any of the Central Excise Officer administering the Act or rules made thereunder immediately before the date of grant of acceptance by the Chief Commissioner of Central Excise, Large Taxpayer Unit, shall be deemed to have been issued by Central Excise Officers of the said unit.

(5) Provisions of these rules, insofar as they are not inconsistent with the provisions of this rule shall mutatis mutandis apply in case of a large taxpayer.]

 

 

 

 

1. Cenvat Credit Rules, 2004

 

CENVAT Credit Rules, 2004

NOTIFICATION No. 23/2004-C.E. (N.T.), dated 10-9-2004

In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 (1 of 1944) and section 94 of the Finance Act, 1994 (32 of 1994) and in supersession of the CENVAT Credit Rules, 2002 and the Service Tax Credit Rules, 2002, except as respects things done or omitted to be done before such supersession, the Central Government hereby makes the following rules, namely :—

Short title, extent and commencement.

1. (1) These rules may be called the CENVAT Credit Rules, 2004.

(2) They extend to the whole of India :

Provided that nothing contained in these rules relating to availment and utilization of credit of service tax shall apply to the State of Jammu and Kashmir.

(3) They shall come into force from the date of their publication in the Official Gazette.

 

Definitions.

2. In these rules, unless the context otherwise requires,—

      (a)  “capital goods” means:—

             (A)  the following goods, namely:—

                       (i)  all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, ¹[heading 6805, grinding wheels and the like, and parts thereof falling under heading 6804] of the First Schedule to the Excise Tariff Act;

                      (ii)  pollution control equipment;

                     (iii)  components, spares and accessories of the goods specified at (i) and (ii);

                     (iv)  moulds and dies, jigs and fixtures;

                      (v)  refractories and refractory materials;

                     (vi)  tubes and pipes and fittings thereof; and

                    (vii)  storage tank,

                    used—

                      (1)  in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in an office; or

                      (2)  for providing output service,

             (B)  motor vehicle registered in the name of provider of output service for providing taxable service as specified in sub-clauses (f), (n), (o), (zr), (zzp), (zzt) and (zzw) of clause (105) of section 65 of the Finance Act;

      (b)  “Customs Tariff Act” means the Customs Tariff Act, 1975 (51 of 1975);

      (c)  “Excise Act” means the Central Excise Act, 1944 (1 of 1944);

      (d)  “exempted goods” means excisable goods which are exempt from the whole of the duty of excise leviable thereon, and includes goods which are chargeable to “Nil” rate of duty;

      (e)  “exempted services” means taxable services which are exempt from the whole of the service tax leviable thereon, and includes services on which no service tax is leviable under section 66 of the Finance Act;

       (f)  “Excise Tariff Act” means the Central Excise Tariff Act, 1985 (5 of 1986);

      (g)  “Finance Act” means the Finance Act, 1994 (32 of 1994);

      (h)  “final products” means excisable goods manufactured or produced from input, or using input service;

      (ij)  “first stage dealer” means a dealer, who purchases the goods directly from,—

               (i)  the manufacturer under the cover of an invoice issued in terms of the provisions of Central Excise Rules, 2002 or from the depot of the said manufacturer, or from premises of the consignment agent of the said manufacturer or from any other premises from where the goods are sold by or on behalf of the said manufacturer, under cover of an invoice; or

              (ii)  an importer or from the depot of an importer or from the premises of the consignment agent of the importer, under cover of an invoice;

      (k)  “input” means—

               (i)  all goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production;

              (ii)  all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service.

            Explanation 1.—The light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever.

            Explanation 2.—Input include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer;

       (l)  “input service” means any service,—

               (i)  used by a provider of taxable service for providing an output service; or

              (ii)  used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and ^1a[clearance of final products, upto the place of removal],

              and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal;

       (m)  “input service distributor” means an office of the manufacturer or producer of final products or provider of output service, which receives invoices issued under rule 4A of the Service Tax Rules, 1994 towards purchases of input services and issues invoice, bill or, as the case may be, challan for the purposes of distributing the credit of service tax paid on the said services to such manufacturer or producer or provider, as the case may be;

        (n)  “job work” means processing or working upon of raw material or semi-finished goods supplied to the job worker, so as to complete a part or whole of the process resulting in the manufacture or finishing of an article or any operation which is essential for aforesaid process and the expression “job worker” shall be construed accordingly;

   ²[(na)  “large taxpayer” shall have the meaning assigned to it in  the Central Excise Rules, 2002;]

³[⁴[(naa)] “manufacturer” or “producer” in relation to articles of jewellery falling under heading 7113 of the First Schedule to the Excise Tariff Act, includes a person who is liable to pay duty of excise leviable on such goods under sub-rule (1) of rule 12AA of the Central Excise Rules, 2002;]

        (o)  “notification” means the notification published in the Official Gazette;

        (p)  “output service” means ^4a[any taxable service, excluding the taxable service referred to in sub-clause (zzp) of clause (105) of section 65 of the Finance Act, provided by the provider of taxable service], to a customer, client, subscriber, policy holder or any other person, as the case may be, and the expressions “provider” and “provided” shall be construed accordingly;

              ⁵[***]

        (q)  “person liable for paying service tax” has the meaning as assigned to it in clause (d) of sub-rule (1) of rule 2 of the Service Tax Rules, 1994;

      (r)  “provider of taxable service” include a person liable for paying service tax;

      (s)  “second stage dealer” means a dealer who purchases the goods from a first stage dealer;

       (t)  words and expressions used in these rules and not defined but defined in the Excise Act or the Finance Act shall have the meanings respectively assigned to them in those Acts.

 

CENVAT credit.

3. (1) A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of—

       (i)  the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act;

      (ii)  the duty of excise specified in the Second Schedule to the Excise Tariff Act, leviable under the Excise Act;

     (iii)  the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978);

     (iv)  the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957);

      (v)  the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001);

     (vi)  the Education Cess on excisable goods leviable under section 91 read with section 93 of the Finance (No. 2) Act, 2004 (23 of 2004);

⁶[(via)  the Secondary and Higher Education Cess on excisable goods leviable under section 136 read with section 138 of the Finance Act, 2007 (22 of 2007);]

    (vii)  the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv), (v) ⁷[, (vi) and (via)];

⁸[(viia) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act ⁹[***] :

            Provided that a provider of taxable service shall not be eligible to take credit of such additional duty;]

   (viii)  the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of 2003);

     (ix)  the service tax leviable under section 66 of the Finance Act;

      (x)  the Education Cess on taxable services leviable under section 91 read with section 95 of the Finance (No. 2) Act, 2004 (23 of 2004); and

¹⁰[(xa)  the Secondary and Higher Education Cess on taxable services leviable under section 136 read with section 140 of the Finance Act, 2007 (22 of 2007); and]

¹¹[(xi)  the additional duty of excise leviable under ¹²[section 85 of Finance Act, 2005 (18 of 2005),]]

paid on—

       (i)  any input or capital goods received in the factory of manufacture of final product or premises of the provider of output service on or after the 10th day of September, 2004; and

      (ii)  any input service received by the manufacturer of final product or by the provider of output services on or after the 10th day of September, 2004,

including the said duties, or tax, or cess paid on any input or input service, as the case may be, used in the manufacture of intermediate products, by a job-worker availing the benefit of exemption specified in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 214/86-Central Excise, dated the 25th March, 1986, published in the Gazette of India vide number G.S.R. 547(E), dated the 25th March, 1986, and received by the manufacturer for use in, or in relation to, the manufacture of final product, on or after the 10th day of September, 2004.

Explanation.—For the removal of doubts it is clarified that the manufacturer of the final products and the provider of output service shall be allowed CENVAT credit of additional duty leviable under section 3 of the Customs Tariff Act on goods falling under heading 98.01* of the First Schedule to the Customs Tariff Act.

(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.

(3) Notwithstanding anything contained in sub-rule (1), in relation to a service which ceases to be an exempted service, the provider of the output service shall be allowed to take CENVAT credit of the duty paid on the inputs received on and after the 10th day of September, 2004 and lying in stock on the date on which any service ceases to be an exempted service and used for providing such service.

(4) The CENVAT credit may be utilized for payment of—

      (a)  any duty of excise on any final product; or

      (b)  an amount equal to CENVAT credit taken on inputs if such inputs are removed as such or after being partially processed; or

      (c)  an amount equal to the CENVAT credit taken on capital goods if such capital goods are removed as such; or

      (d)  an amount under sub-rule (2) of rule 16 of Central Excise Rules, 2002; or

      (e)  service tax on any output service:

Provided that while paying duty of excise or service tax, as the case may be, the CENVAT credit shall be utilized only to the extent such credit is available on the last day of the month or quarter, as the case may be, for payment of duty or tax relating to that month or the quarter, as the case may be:

Provided further that the CENVAT credit of the duty, or service tax, paid on the inputs, or input services, used in the manufacture of final products cleared after availing of the exemption under the following notifications of Government of India in the Ministry of Finance (Department of Revenue),—

       (i)  No. 32/99-Central Excise, dated the 8th July, 1999 [G.S.R. 508(E), dated 8th July, 1999];

      (ii)  No. 33/99-Central Excise, dated the 8th July, 1999 [G.S.R. 509(E), dated 8th July, 1999];

     (iii)  No. 39/2001-Central Excise, dated the 31st July, 2001 [G.S.R. 565(E), dated the 31st July, 2001];

     (iv)  No. 56/2002-Central Excise, dated the 14th November, 2002 [G.S.R. 764(E), dated the 14th November, 2002];

      (v)  No. 57/2002-Central Excise, dated 14th November, 2002 [G.S.R. 765(E), dated the 14th November, 2002];

     (vi)  No. 56/2003-Central Excise, dated the 25th June, 2003 [G.S.R. 513(E), dated the 25th June, 2003]; and

    (vii)  No. 71/2003-Central Excise, dated the 9th September, 2003 [G.S.R. 717(E), dated the 9th September, 2003],

shall, respectively, be utilized only for payment of duty on final products, in respect of which exemption under the said respective notifications is availed of:

¹³[Provided also that no credit of the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, ¹⁴[***] shall be utilised for payment of service tax on any output service:

^14a[Provided also that the CENVAT credit of any duty specified in sub-rule (1), except the National Calamity Contingent duty in item (v) thereof, shall not be utilized for payment of the said National Calamity Contingent duty on goods falling under tariff items 8517 12 10 and 8517 12 90 respectively of the First Schedule of the Central Excise Tariff:]

Provided also that the CENVAT credit of any duty mentioned in sub-rule (1), other than credit of additional duty of excise leviable under ¹⁵[section 85 of Finance Act, 2005 (18 of 2005)] shall not be utilised for payment of said additional duty of excise on final products.]

(5) When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, or premises of the provider of output service, the manufacturer of the final products or provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in rule 9 :

Provided that such payment shall not be required to be made where any inputs ^15a[or capital goods] are removed outside the premises of the provider of output service for providing the output service :

^15b[***]

^15c[Provided also that if the capital goods, on which CENVAT Credit has been taken, are removed after being used, the manufacturer or provider of output service shall pay an amount equal to the CENVAT Credit taken on the said capital goods reduced by 2.5 per cent for each quarter of a year or part thereof from the date of taking the Cenvat Credit.]

¹⁶[(5A) If the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value.]

^16a[(5B) If the value of any,

       (i)  input, or

      (ii)  capital goods before being put to use,

on which Cenvat credit has been taken is written off fully or where any provision to write off fully has been made in the books of account, then the manufacturer shall pay an amount equivalent to the Cenvat credit taken in respect of the said input or capital goods:

Provided that if the said input or capital goods is subsequently used in the manufacture of final products, the manufacturer shall be entitled to take the credit of the amount equivalent to the Cenvat credit paid earlier subject to the other provisions of these rules.]

¹⁷[(5C) Where on any goods manufactured or produced by an assessee, the payment of duty is ordered to be remitted under rule 21 of the Central Excise Rules, 2002, the CENVAT credit taken on the inputs used in the manufacture or production of said goods shall be reversed.]

(6) The amount paid under sub-rule (5) ¹⁶[and sub-rule (5A)] shall be eligible as CENVAT credit as if it was a duty paid by the person who removed such goods under sub-rule (5) ¹⁶[and sub-rule (5A)].

(7) Notwithstanding anything contained in sub-rule (1) and sub-rule (4),—

      (a)  CENVAT credit in respect of inputs or capital goods produced or manufactured, by a hundred per cent export-oriented undertaking or by a unit in an Electronic Hardware Technology Park or in a Software Technology Park other than a unit which pays excise duty levied under section 3 of the Excise Act read with serial numbers 3, 5, 6 and 7 of Notification No. 23/2003-Central Excise, dated the 31st March, 2003 [G.S.R. 266(E), dated the 31st March, 2003] and used in the manufacture of the final products or in providing an output service, in any other place in India, in case the unit pays excise duty under section 3 of the Excise Act read with serial number 2 of the Notification No. 23/2003-Central Excise, dated the 31st March, 2003 [G.S.R. 266(E), dated the 31st March, 2003], shall be admissible equivalent to the amount calculated in the following manner, namely:—

            Fifty per cent of [X multiplied by {(1+BCD/100) multiplied by (CVD/100)}], where BCD and CVD denote ad valorem rates, in per cent of basic customs duty and additional duty of customs leviable on the inputs or the capital goods respectively and X denotes the assessable value :

                ¹⁸[Provided that the CENVAT credit in respect of inputs and capital goods cleared on or after 1st March, 2006 from an export oriented undertaking or by a unit in Electronic Hardware Technology Park or in a Software Technology Park, as the case may be, on which such unit pays excise duty under section 3 of the Excise Act read with serial number 2 of the Notification No. 23/2003-Central Excise, dated 31st March, 2003 [G.S.R. 266(E), dated the 31st March, 2003] shall be equal to X multiplied by {(1+BCD/400) multiplied by (CVD/100)}.]

  ¹⁹[(b)  CENVAT credit in respect of—

               (i)  the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978);

              (ii)  the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001);

             (iii)  the education cess on excisable goods leviable under section 91 read with section 93 of the Finance (No. 2) Act, 2004 (23 of 2004);

       ²⁰[(iiia)  the Secondary and Higher Education Cess on excisable goods leviable under section 136 read with section 138 of the Finance Act, 2007 (22 of 2007);]

             (iv)  the additional duty leviable under section 3 of the Customs  Tariff Act, equivalent to the duty of excise specified under items (i), (ii) and (iii) above;

              (v)  the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of 2003);

             (vi)  the education cess on taxable services leviable under section 91 read with section 95 of the Finance (No. 2) Act, 2004 (23 of 2004); and

²¹[(via)  the Secondary and Higher Education Cess on taxable services leviable under section 136 read with section 140 of the Finance Act, 2007 (22 of 2007); and]

            (vii)  the additional duty of excise leviable under ²²[section 85 of Finance Act, 2005 (18 of 2005),]

            ²³[shall be utilised towards payment of duty of excise or as the case may be, of service tax leviable under the said Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 or the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001), or the education cess on excisable goods leviable under section 91 read with section 93 of the said Finance (No. 2) Act, 2004 (23 of 2004), or the Secondary and Higher Education Cess on excisable goods leviable under section 136 read with section 138 of the Finance Act, 2007 (22 of 2007) or the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of 2003), or the education cess on taxable services leviable under section 91 read with section 95 of the said Finance (No. 2) Act, 2004 (23 of 2004), or the Secondary and Higher Education Cess on taxable services leviable under section 136 read with section 140 of the Finance Act, 2007 (22 of 2007), or the additional duty of excise leviable under section 85 of the Finance Act, 2005 (18 of 2005) respectively, on any final products manufactured by the manufacturer or for payment of such duty on inputs themselves, if such inputs are removed as such or after being partially processed or on any output service :]

            ²⁴[Provided that the credit of the education cess on excisable goods and the education cess on taxable services can be utilized, either for payment of the education cess on excisable goods or for the payment of the education cess on taxable services :

            Provided further that the credit of the Secondary and Higher Education Cess on excisable goods and the Secondary and Higher Education Cess on taxable services can be utilized, either for payment of the Secondary and Higher Education Cess on excisable goods or for the payment of the Secondary and Higher Education Cess on taxable services.]

            Explanation.—For the removal of doubts, it is hereby declared that the credit of the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) paid on or after the 1st day of April, 2000, may be utilised towards payment of duty of excise leviable under the First Schedule or the Second Schedule to the Excise Tariff Act;]

      (c)  the CENVAT credit, in respect of additional duty leviable under section 3 of the Customs Tariff Act, paid on marble slabs or tiles falling under ²⁵[tariff items  2515 12 20 and 2515 12 90 respectively] of the First Schedule to the Excise Tariff Act shall be allowed to the extent of thirty rupees per square metre.

Explanation.—Where the provisions of any other rule or notification provide for grant of whole or part exemption on condition of non-availability of credit of duty paid on any input or capital goods, or of service tax paid on input service, the provisions of such other rule or notification shall prevail over the provisions of these rules.

 

Conditions for allowing CENVAT credit.

4. (1) The CENVAT credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of output service:

²⁶[Provided that in respect of final products, namely, articles of jewellery falling under heading 7113 of the First Schedule to the Excise Tariff Act, the CENVAT credit of duty paid on inputs may be taken immediately on receipt of such inputs in the registered premises of the person who get such final products manufactured on his behalf, on job work basis, subject to the condition that the inputs are used in the manufacture of such final product by the job worker.]

(2)(a) The CENVAT credit in respect of capital goods received in a factory or in the premises of the provider of output service at any point of time in a given financial year shall be taken only for an amount not exceeding fifty per cent of the duty paid on such capital goods in the same financial year:

Provided that the CENVAT credit in respect of capital goods shall be allowed for the whole amount of the duty paid on such capital goods in the same financial year if such capital goods are cleared as such in the same financial year:

^26a[Provided further that the CENVAT credit of the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, ²⁷[***] in respect of capital goods shall be allowed immediately on receipt of the capital goods in the factory of a manufacturer.]

(b) The balance of CENVAT credit may be taken in any financial year subsequent to the financial year in which the capital goods were received in the factory of the manufacturer, or in the premises of the provider of output service, if the capital goods, other than components, spares and accessories, refractories and refractory materials, moulds and dies and goods falling under ²⁸[heading 6805, grinding wheels and the like, and parts thereof falling under heading 6804] of the First Schedule to the Excise Tariff Act, are in the possession of the manufacturer of final products, or provider of output service in such subsequent years.

Illustration.—A manufacturer received machinery on the 16th day of April, 2002 in his factory. CENVAT of two lakh rupees is paid on this machinery. The manufacturer can take credit upto a maximum of one lakh rupees in the financial year 2002-03, and the balance in subsequent years.

(3) The CENVAT credit in respect of the capital goods shall be allowed to a manufacturer, provider of output service even if the capital goods are acquired by him on lease, hire purchase or loan agreement, from a financing company.

(4) The CENVAT credit in respect of capital goods shall not be allowed in respect of that part of the value of capital goods which represents the amount of duty on such capital goods, which the manufacturer or provider of output service claims as depreciation under section 32 of the Income-tax Act, 1961 (43 of 1961).

(5)(a) The CENVAT credit shall be allowed even if any inputs or capital goods as such or after being partially processed are sent to a job worker for further processing, testing, repair, re-conditioning ²⁹[, or for the manufacture of intermediate goods necessary for the manufacture of final products] or any other purpose, and it is established from the records, challans or memos or any other document produced by the manufacturer or provider of output service taking the CENVAT credit that the goods are received back in the factory within one hundred and eighty days of their being sent to a job worker and if the inputs or the capital goods are not received back within one hundred eighty days, the manufacturer or provider of output service shall pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods by debiting the CENVAT credit or otherwise, but the manufacturer or provider of output service can take the CENVAT credit again when the inputs or capital goods are received back in his factory or in the premises of the provider of output service.

(b) The CENVAT credit shall also be allowed in respect of jigs, fixtures, moulds and dies sent by a manufacturer of final products to a job worker for the production of goods on his behalf and according to his specifications.

(6) The ³⁰[Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be,] having jurisdiction over the factory of the manufacturer of the final products who has sent the input or partially processed inputs outside his factory to a job-worker may, by an order, which shall be valid for a financial year, in respect of removal of such input or partially processed input, and subject to such conditions as he may impose in the interest of revenue including the manner in which duty, if leviable, is to be paid, allow final products to be cleared from the premises of the job-worker.

(7) The CENVAT credit in respect of input service shall be allowed, on or after the day which payment is made of the value of input service and the service tax paid or payable as is indicated in invoice, bill or, as the case may be, challan referred to in rule 9.

 

 

³¹[Refund of CENVAT credit.

5. Where any input or input service is used in the manufacture of final product which is cleared for export under bond or letter of undertaking, as the case may be, or used in the intermediate product cleared for export, or used in providing output service which is exported, the CENVAT credit in respect of the input or input service so used shall be allowed to be utilized by the manufacturer or provider of output service towards payment of,

       (i)  duty of excise on any final product cleared for home consumption or for export on payment of duty; or

      (ii)  service tax on output service,

and where for any reason such adjustment is not possible, the manufacturer or the provider of output service shall be allowed refund of such amount subject to such safeguards, conditions and limitations, as may be specified, by the Central Government, by notification:

Provided that no refund of credit shall be allowed if the manufacturer or provider of output service avails of drawback allowed under the Customs and Central Excise Duties Drawback Rules, 1995, or claims rebate of duty under the Central Excise Rules, 2002, in respect of such duty; or claims rebate of service tax under the Export of Services Rules, 2005 in respect of such tax :

Provided further that no credit of the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act shall be utilised for payment of service tax on any output service.

Explanation.—For the purposes of this rule, the words ‘output service which is exported’ means the output service exported in accordance with the Export of Services Rules, 2005.]

 

³²[Refund of CENVAT credit to units in specified areas.

5A. Notwithstanding anything contrary contained in these rules, where a manufacturer has cleared final products in terms of notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 20/2007-Central Excise, dated the 25th April, 2007 and is unable to utilize the CENVAT credit of duty taken on inputs required for manufacture of final products specified in the said notification, other than final products which are exempt or subject to nil  rate of duty, for payment of duties of excise on said final products, then the Central Government may allow the refund of such credit subject to such procedure, conditions and limitations, as may be specified by notification.

Explanation .— For the purposes of this rule, “duty” means the duties specified in sub-rule (1) of rule 3 of these rules.]

 

Obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services.

6. (1) The CENVAT credit shall not be allowed on such quantity of input or input service which is used in the manufacture of exempted goods or ^32a[for provision of] exempted services, except in the circumstances mentioned in sub-rule (2):

³³[Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12AA 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.]

(2) Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services ³⁴[***] and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for receipt, consumption and inventory of input and input service meant for use in the manufacture of dutiable final products or in providing output service and the quantity of input meant for use in the manufacture of exempted goods or services and take CENVAT credit only on that quantity of input or input service which is intended for use in the manufacture of dutiable goods or in providing output service on which service tax is payable.

^35-40[(3) Notwithstanding anything contained in sub-rules (1) and (2), the manufacturer of goods or the provider of output service, opting not to maintain separate accounts, shall follow either of the following options, as applicable to him, namely:—

       (i)  the manufacturer of goods shall pay an amount equal to ten per cent of value of the exempted goods and the provider of output service shall pay an amount equal to eight per cent of value of the exempted services; or

      (ii)  the manufacturer of goods or the provider of output service shall pay an amount equivalent to the CENVAT credit attributable to inputs and input services used in, or in relation to, the manufacture of exempted goods or for provision of exempted services subject to the conditions and procedure specified in sub-rule (3A).

Explanation I.—If the manufacturer of goods or the provider of output service, avails any of the option under this sub-rule, he shall exercise such option for all exempted goods manufactured by him or, as the case may be, all exempted services provided by him, and such option shall not be withdrawn during the remaining part of the financial year.

Explanation II.—For removal of doubt, it is hereby clarified that the credit shall not be allowed on inputs and input services used exclusively for the manufacture of exempted goods or provision of exempted service.

(3A) For determination and payment of amount payable under clause (ii) of sub-rule (3), the manufacturer of goods or the provider of output service shall follow the following procedure and conditions, namely:—

      (a)  while exercising this option, the manufacturer of goods or the provider of output service shall intimate in writing to the Superintendent of Central Excise giving the following particulars, namely:—

               (i)  name, address and registration No. of the manufacturer of goods or provider of output service;

              (ii)  date from which the option under this clause is exercised or proposed to be exercised;

             (iii)  description of dutiable goods or taxable services;

             (iv)  description of exempted goods or exempted services;

              (v)  CENVAT credit of inputs and input services lying in balance as on the date of exercising the option under this condition;

      (b)  the manufacturer of goods or the provider of output service shall, determine and pay, provisionally, for every month,—

               (i)  the amount equivalent to CENVAT credit attributable to inputs used in or in relation to manufacture of exempted goods, denoted as A;

              (ii)  the amount of CENVAT credit attributable to inputs used for provision of exempted services (provisional)= (B/C) multiplied by D, where B denotes the total value of exempted services provided during the preceding financial year, C denotes the total value of dutiable goods manufactured and removed plus the total value of taxable services provided plus the total value of exempted services provided, during the preceding financial year and D denotes total CENVAT credit taken on inputs during the month minus A;

             (iii)  the amount attributable to input services used in or in relation to manufacture of exempted goods or provision of exempted services (provisional) = (E/F) multiplied by G, where E denotes total value of exempted services provided plus the total value of exempted goods manufactured and removed during the preceding financial year, F denotes total value of taxable and exempted services provided, and total value of dutiable and exempted goods manufactured and removed, during the preceding financial year, and G denotes total CENVAT credit taken on input services during the month;

      (c)  the manufacturer of goods or the provider of output service, shall determine  finally the amount of CENVAT credit attributable to exempted goods and exempted services for the whole financial year in the following manner, namely:—

               (i)  the amount of CENVAT credit attributable to inputs used in or in relation to manufacture of exempted goods, on the basis of total quantity of inputs used in or in relation to manufacture of said exempted goods, denoted as H;

              (ii)  the amount of CENVAT credit attributable to inputs used for provision of exempted services = (J/K) multiplied by L, where J denotes the total value of exempted services provided during the financial year, K denotes the total value of dutiable goods manufactured and removed plus the total value of taxable services provided plus the total value of exempted services provided, during the financial year and L denotes total CENVAT credit taken on inputs during the financial year minus H;

             (iii)  the amount attributable to input services used in or in relation to manufacture of exempted goods or provision of exempted services = (M/N) multiplied by P, where L denotes total value of exempted services provided plus the total value of exempted goods manufactured and removed during the financial year, M denotes total value of taxable and exempted services provided, and total value of dutiable and exempted goods manufactured and removed, during the financial year, and N denotes total CENVAT credit taken on input services during the financial year;

     (d)  the manufacturer of goods or the provider of output service, shall pay an amount equal to the difference between the aggregate amount determined as per condition (c) and the aggregate amount determined and paid as per condition (b), on or before the 30th June of the succeeding financial year, where the amount determined as per condition (c) is more than the amount paid;

      (e)  the manufacturer of goods or the provider of output service, shall, in addition to the amount short-paid, be liable to pay interest at the rate of twenty-four per cent per annum from the due date, i.e., 30th June till the date of payment, where the amount short-paid is not paid within the said due date;

      (f)  where the amount determined as per condition (c) is less than the amount determined and paid as per condition (b), the said manufacturer of goods or the provider of output service may adjust the excess amount on his own, by taking credit of such amount;

      (g)  the manufacturer of goods or the provider of output service shall intimate to the jurisdictional Superintendent of Central Excise, within a period of fifteen days from the date of payment or adjustment, as per condition (d) and (f) respectively, the following particulars, namely:—

               (i)  details of CENVAT credit attributable to exempted goods and exempted services, monthwise, for the whole financial year, determined provisionally as per condition (b),

              (ii)  CENVAT credit attributable to exempted goods and exempted services for the whole financial year, determined as per condition (c),

             (iii)  amount short paid determined as per condition (d), alongwith the date of payment of the amount short-paid,

             (iv)  interest payable and paid, if any, on the amount short-paid, determined as per condition (e), and

              (v)  credit taken on account of excess payment, if any, determined as per condition (f);

      (h)  where the amount equivalent to CENVAT credit attributable to exempted goods or exempted services cannot be determined provisionally, as prescribed in condition (b), due to reasons that no dutiable goods were manufactured and no taxable service was provided in the preceding financial year, then the manufacturer of goods or the provider of output service is not required to determine and pay such amount provisionally for each month, but shall determine the CENVAT credit attributable to exempted goods or exempted services for the whole year as pres-cribed in condition (c) and pay the amount so calculated on or before 30th June of the succeeding financial year.

       (i)  where the amount determined under condition (h) is not paid within the said due date, i.e., the 30th June, the manufacturer of goods or the provider of output service shall, in addition to the said amount, be liable to pay interest at the rate of twenty four per cent per annum from the due date till the date of payment.

Explanation I.—“Value” for the purpose of sub-rules (3) and (3A) shall have the same meaning assigned to it under section 67 of the Finance Act, 1994 read with rules made thereunder or, as the case may be, the value determined under section 4 or 4A of the Central Excise Act, 1944 read with rules made thereunder.

Explanation II.—The amount mentioned in sub-rules (3) and (3A), unless specified otherwise, shall be paid by the manufacturer of goods or the provider of output service by debiting the CENVAT credit or otherwise on or before the 5th day of the following month except for the month of March, when such payment shall be made on or before the 31st day of the month of March.

Explanation III.—If the manufacturer of goods or the provider of output service fails to pay the amount payable under sub-rule (3) or as the case may be sub-rule (3A), it shall be recovered, in the manner as provided in rule 14, for recovery of CENVAT credit wrongly taken.]

(4) No CENVAT credit shall be allowed on capital goods which are used exclusively in the manufacture of exempted goods or in providing exempted services, 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) Notwithstanding anything contained in sub-rules (1), (2) and (3), credit of the whole of service tax paid on taxable service as specified in sub-clauses (g), (p), (q), (r), (v), (w), (za), (zm), (zp), (zy), (zzd), (zzg), (zzh), (zzi), (zzk), (zzq) and (zzr) of clause (105) of section 65 of the Finance Act shall be allowed unless such service is used exclusively in or in relation to the manufacture of exempted goods or providing exempted services.

(6) The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case the excisable goods removed without payment of duty are either—

       (i)  cleared to a unit in a special economic 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 Park; or

     (iv)  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 28th August, 1995, number G.S.R. 602(E), dated the 28th August, 1995; or

      (v)  cleared for export under bond in terms of the provisions of the Central Excise Rules, 2002; or

     (vi)  gold or silver falling within Chapter 71 of the said First Schedule, arising in the course of manufacture of copper or zinc by smelting ⁴¹[; or]

⁴¹[(vii)  all goods which are exempt from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable under section 3 of the said Customs Tariff Act when imported into India and supplied against International Competitive Bidding in terms of Notification No. 6/2002-Central Excise, dated the 1st March, 2002 ⁴²[or Notification No.  6/2006-Central Excise, dated the 1st March, 2006, as the case may be].]

 

Manner of distribution of credit by input service distributor.

7. The input service distributor may distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or units providing output service, subject to the following conditions, namely:—

      (a)  the credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon; or

      (b)  credit of service tax attributable to service used in a unit exclusively engaged in manufacture of exempted goods or providing of exempted services shall not be distributed.

 

Storage of input outside the factory of the manufacturer.

8. The Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, 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 input 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 input is not used in the manner specified 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 input.

 

Documents and accounts.

9. (1) The CENVAT credit shall be taken by the manufacturer or the provider of output service or input service distributor, as the case may be, on the basis of any of the following documents, namely :—

      (a)  an invoice issued by—

               (i)  a manufacturer for clearance of—

                      (I)  inputs or capital goods from his factory or depot or from the premises of the consignment agent of the said manufacturer or from any other premises from where the goods are sold by or on behalf of the said manufacturer;

                     (II)  inputs or capital goods as such;

              (ii)  an importer;

             (iii)  an importer from his depot or from the premises of the consignment agent of the said importer if the said depot or the premises, as the case may be, is registered in terms of the provisions of Central Excise Rules, 2002;

             (iv)  a first stage dealer or a second stage dealer, as the case may be, in terms of the provisions of Central Excise Rules, 2002; or

      (b)  a supplementary invoice, issued by a manufacturer or importer of inputs or capital goods in terms of the provisions of Central Excise Rules, 2002 from his factory or depot or from the premises of the consignment agent of the said manufacturer or importer or from any other premises from where the goods are sold by, or on behalf of, the said manufacturer or importer, in case additional amount of excise duties or additional duty leviable under section 3 of the Customs Tariff Act, has been paid, except where the additional amount of duty became recoverable from the manufacturer or importer of inputs or capital goods on account of any non-levy or short-levy by reason of fraud, collusion or any wilful mis-statement or suppression of facts or contravention of any provisions of the Excise Act, or of the Customs Act, 1962 (52 of 1962) or the rules made thereunder with intent to evade payment of duty.

            Explanation.—For removal of doubts, it is clarified that supplementary invoice shall also include challan or any other similar document evidencing payment of additional amount of additional duty leviable under section 3 of the Customs Tariff Act; or

      (c)  a bill of entry; or

      (d)  a certificate issued by an appraiser of customs in respect of goods imported through a Foreign Post Office; or

      (e)  a challan evidencing payment of service tax by the person liable to pay service tax under sub-clauses (iii) ⁴³[, (iv) ⁴⁴[, (v) and (vii)]] of clause (d) of sub-rule (1) of rule 2 of the Service Tax Rules, 1994; or

       (f)  an invoice, a bill or challan issued by a provider of input service on or after the 10th day of September, 2004; or

      (g)  an invoice, bill or challan issued by an input service distributor under rule 4A of the Service Tax Rules, 1994.

^44a[Provided that the credit of additional duty of customs levied under sub-section (5) of section 3 of the Customs Tariff Act, 1975 (51 of 1975) shall not be allowed if the invoice or the supplementary invoice, as the case may be, bears an indication to the effect that no credit of the said additional duty shall be admissible.]

⁴⁵[(2) No CENVAT credit under sub-rule (1) shall be taken unless all the particulars as prescribed under the Central Excise Rules, 2002 or the Service Tax Rules, 1994, as the case may be, are contained in the said document:

                Provided that if the said document does not contain all the particulars but contains the details of duty or service tax payable, description of the goods or taxable service, assessable value, ⁴⁶[Central Excise or Service Tax registration number of the person issuing the invoice, as the case may be,] name and address of the factory or warehouse or premises of first or second stage dealers or provider of taxable service, and the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, is satisfied that the goods or services covered by the said document have been received and accounted for in the books of account of the receiver, he may allow the CENVAT credit.]

(3) ⁴⁷[***]

(4) The CENVAT credit in respect of input or capital goods purchased from a first stage dealer or second stage dealer shall be allowed only if such first stage dealer or second stage dealer, as the case may be, has maintained records indicating the fact that the input or capital goods was supplied from the stock on which duty was paid by the producer of such input or capital goods and only an amount of such duty on pro rata basis has been indicated in the invoice issued by him.

(5) The manufacturer of final products or the provider of output service shall maintain proper records for the receipt, disposal, consumption and inventory of the input and capital goods in which the relevant information regarding the value, duty paid, CENVAT credit taken and utilized, the person from whom the input or capital goods have been procured is recorded and the burden of proof regarding the admissibility of the CENVAT credit shall lie upon the manufacturer or provider of output service taking such credit.

(6) The manufacturer of final products or the provider of output service shall maintain proper records for the receipt and consumption of the input services in which the relevant information regarding the value, tax paid, CENVAT credit taken and utilized, the person from whom the input service has been procured is recorded and the burden of proof regarding the admissibility of the CENVAT credit shall lie upon the manufacturer or provider of output service taking such credit.

(7) The manufacturer of final products shall submit within ten days from the close of each month to the Superintendent of Central Excise, a monthly return in the form specified, by notification, by the Board:

Provided that where a manufacturer is availing exemption under a notification based on the value or quantity of clearances in a financial year, he shall file a quarterly return in the form specified, by notification, by the Board within twenty days after the close of the quarter to which the return relates.

(8) A first stage dealer or a second stage dealer, as the case may be, shall submit within fifteen days from the close of each quarter of a year to the Superintendent of Central Excise, a return in the form specified, by notification, by the Board.

(9) The provider of output service availing CENVAT credit, shall submit a half yearly return in form specified, by notification, by the Board to the Superintendent of Central Excise, by the end of the month following the particular quarter or half year.

⁴⁸[(10) The input service distributor, shall furnish a half yearly return in such form as may be specified, by notification, by the Board, giving the details of credit received and distributed during the said half year to the jurisdictional Superintendent of Central Excise, not later than the last day of the month following the half year period.]

⁴⁹[(11) The provider of output service, availing CENVAT credit referred to in sub-rule (9) or the input service distributor referred to in sub-rule (10), as the case may be, may submit a revised return to correct a mistake or omission within a period of sixty days from the date of submission of the return under sub-rule (9) or sub-rule (10), as the case may be.]

 

⁵⁰[Information relating to principal inputs

9A. (1) A manufacturer of final products shall furnish to the Superintendent of Central Excise, annually by 30th April of each Financial Year, a declaration in the form specified, by a notification, by the Board, in respect of each of the excisable goods manufactured or to be manufactured by him, the principal inputs and the quantity of such principal inputs required for use in the manufacture of unit quantity of such final products :

Provided that for the year 2004-05, such information shall be furnished latest by 31st December, 2004.

(2) If a manufacturer of final products intends to make any alteration in the information so furnished under sub-rule (1), he shall furnish information to the Superintendent of Central Excise together with the reasons for such alteration before the proposed change or within 15 days of such change in the Form specified by the Board under sub-rule (1).

(3) A manufacturer of final products shall submit, within ten days from the close of each month, to the Superintendent of Central Excise, a monthly return in the Form specified, by a notification, by the Board, in respect of information regarding the receipt and consumption of each principal inputs with reference to the quantity of final products manufactured by him.

(4) The Central Government may, by notification and subject to such conditions or limitations, as may be specified in such notification, specify manufacturers or class of manufacturers who may not be required to furnish declaration mentioned in sub-rule (1) or monthly return mentioned in sub-rule (3).

Explanation.—For the purposes of this rule, “principal inputs”, means any input which is used in the manufacture of final products where the cost of such input constitutes not less than 10% of the total cost of raw-materials for the manufacture of unit quantity of given final products.]

 

Transfer of CENVAT credit.

10. (1) If a manufacturer of the final products shifts his factory to another site or the factory is transferred on account of change in ownership or on account of sale, merger, amalgamation, lease or transfer of the factory to a joint venture with the specific provision for transfer of liabilities of such factory, then, the manufacturer shall be allowed to transfer the CENVAT credit lying unutilized in his accounts to such transferred, sold, merged, leased or amalgamated factory.

(2) If a provider of output service shifts or transfers his business on account of change in ownership or on account of sale, merger, amalgamation, lease or transfer of the business to a joint venture with the specific provision for transfer of liabilities of such business, then, the provider of output service shall be allowed to transfer the CENVAT credit lying unutilized in his accounts to such transferred, sold, merged, leased or amalgamated business.

(3) The transfer of the CENVAT credit under sub-rules (1) and (2) shall be allowed only if the stock of inputs as such or in process, or the capital goods is also transferred along with the factory or business premises to the new site or ownership and the inputs, or capital goods, on which credit has been availed of are duly accounted for to the satisfaction of the Deputy Commissioner of Central Excise or, as the case may be, the Assistant Commissioner of Central Excise.

 

Transitional provision.

11. (1) Any amount of credit earned by a manufacturer under the CENVAT Credit Rules, 2002, as they existed prior to the 10th day of September, 2004 or by a provider of output service under the Service Tax Credit Rules, 2002, as they existed prior to the 10th day of September, 2004, and remaining unutilized on that day shall be allowed as CENVAT credit to such manufacturer or provider of output service under these rules, and be allowed to be utilized in accordance with these rules.

(2) A manufacturer who opts for exemption from the whole of the duty of excise leviable on goods manufactured by him under a notification based on the value or quantity of clearances in a financial year, and who has been taking CENVAT credit on inputs or input services before such option is exercised, shall be required to pay an amount equivalent to the CENVAT credit, if any, allowed to him in respect of inputs lying in stock or in process or contained in final products lying in stock on the date when such option is exercised and after deducting the said amount from the balance, if any, lying in his credit, the balance, if any, still remaining shall lapse and shall not be allowed to be utilized for payment of duty on any excisable goods, whether cleared for home consumption or for export.

⁵¹[(3) A manufacturer or producer of a final product 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,—

       (i)  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

      (ii)  the said final product has been exempted absolutely under section 5A of the Act, and after deducting the said amount from the balance of CENVAT credit, if any, lying in his credit, the balance, if any, still remaining shall lapse and shall not be allowed to be utilized for payment of duty on any other final product whether cleared for home consumption or for export, or for payment of service tax on any output service, whether provided in India or exported.

(4) A provider of output service shall be 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, 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) and after deducting the said amount from the balance of CENVAT credit, if any, lying in his credit, the balance, if any, still remaining shall lapse and shall not be allowed to be utilized for payment of duty on any excisable goods, whether cleared for home consumption or for export or for payment of service tax on any other output service, whether provided in India or exported.]

 

Special dispensation in respect of inputs manufactured in factories located in specified areas of North East region, Kutch district of Gujarat, State of Jammu and Kashmir and State of Sikkim.

12. Notwithstanding anything contained in these rules, where a manufacturer has cleared any inputs or capital goods, in terms of notifications of the Government of India in the Ministry of Finance (Department of Revenue) No. 32/99-Central Excise, dated the 8th July, 1999 [G.S.R. 508(E), dated the 8th July, 1999] or No. 33/99- Central Excise, dated the 8th July, 1999 [G.S.R. 509(E), dated the 8th July, 1999] or No. 39/2001-Central Excise, dated the 31st July, 2001 [G.S.R. 565(E), dated the 31st July, 2001] or notification of the Government of India in the erstwhile Ministry of Finance and Company Affairs (Department of Revenue) No. 56/2002-Central Excise, dated the 14th November, 2002 [G.S.R. 764(E), dated 14th November, 2002] or No. 57/2002-Central Excise, dated the 14th November, 2002 [GSR 765(E), dated the 14th November, 2002] or notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 56/2003-Central Excise, dated the 25th June, 2003 [G.S.R. 513(E), dated the 25th June, 2003] or 71/2003-Central Excise, dated the 9th September, 2003 [G.S.R. 717(E), dated the 9th September, 2003 ⁵²[or No. 20/2007-Central Excise, dated the 25th April, 2007 [G.S.R. 307(E), dated the 25th April, 2007]] the CENVAT credit on such inputs or capital goods shall be admissible as if no portion of the duty paid on such inputs or capital goods was exempted under any of the said notifications. 

 

⁵³[Procedure and facilities for large taxpayer.

12A. Notwithstanding anything contained in these rules, the following procedure shall apply to a large taxpayer,—

(1) A large taxpayer may remove inputs, except motor spirit, commonly known as petrol, high speed diesel and light diesel oil or capital goods, as such, on which CENVAT credit has been taken, without payment of an amount specified in sub-rule (5) of rule 3 of these rules, under the cover of a transfer challan or invoice, from any of his registered premises (hereinafter referred to as the sender premises) to his other registered premises, other than a premises of a first or second stage dealer (hereinafter referred to as the recipient premises), for further use in the manufacture or production of final products in recipient premises subject to condition that—

      (a)  the final products are manufactured or produced using the said inputs and cleared on payment of appropriate duties of excise leviable thereon within a period of six months, from the date of receipt of the inputs in the recipient premises; or

      (b)  the final products are manufactured or produced using the said inputs and exported out of India, under bond or letter of undertaking within a period of six months, from the date of receipt of the input goods in the recipient premises,

and that any other conditions prescribed by the Commissioner of Central Excise, Large Taxpayer Unit in this regard are satisfied.

Explanation 1 : The transfer challan or invoice shall be serially numbered and shall contain the registration number, name, address of the large taxpayer, description, classification, time and date of removal, mode of transport and vehicle registration number, quantity of the goods and registration number and name of the consignee:

Provided that if the final products manufactured or produced using the said inputs are not cleared on payment of appropriate duties of excise leviable thereon or are not exported out of India within the said period of six months from the date of receipt of the input goods in the recipient premises, or such inputs are cleared as such from the recipient premises, an amount equal to the credit taken in respect of such inputs by the sender premises shall be paid by the recipient premises with interest in the manner and rate specified under rule 14 of these rules:

Provided further that if such capital goods are used exclusively in the manufacture of exempted goods, or such capital goods are cleared as such from the recipient premises, an amount equal to the credit taken in respect of such capital goods by the sender premises shall be paid by the recipient premises with interest in the manner and rate specified under rule 14 of these rules.

Explanation 2 : If a large taxpayer fails to pay any amount due in terms of the first and second proviso, it shall be recovered along with interest in the manner as provided under rule 14 of these rules:

Provided also that nothing contained in this sub-rule shall be applicable if the recipient premises is availing following notifications of Government of India in the Ministry of Finance (Department of Revenue),—

       (i)  No. 32/99-Central Excise, dated the 8th July, 1999 [G.S.R. 508(E), dated the 8th July, 1999];

      (ii)  No. 33/99-Central Excise, dated the 8th July, 1999 [G.S.R. 509(E), dated the 8th July, 1999];

     (iii)  No. 39/2001-Central Excise, dated the 31st July, 2001 [G.S.R. 565(E), dated the 31st July, 2001];

     (iv)  No. 56/2002-Central Excise, dated the 14th November, 2002 [G.S.R. 764(E), dated the 14th November, 2002];

      (v)  No. 57/2002-Central Excise, dated the 14th November, 2002 [G.S.R. 765(E), dated the 14th November, 2002];

     (vi)  No. 56/2003-Central Excise, dated the 25th June, 2003 [G.S.R. 513(E), dated the 25th June, 2003];

    (vii)  No. 71/2003-Central Excise, dated the 9th September, 2003 [G.S.R. 717(E), dated the 9th September, 2003]; and

⁵⁴[(viii) No. 20/2007-Central Excise, dated the 25th April, 2007 [G.S.R. 307(E), dated the 25th April, 2007]]:

Provided also that nothing contained in this sub-rule shall be applicable to an export oriented unit or a unit located in an Electronic Hardware Technology Park or Software Technology Park.

(2) The first recipient premises may take CENVAT credit of the amount paid under first proviso to sub-rule (1) as if it was a duty paid by the sender premises who removed such goods on the basis of a document showing payment of such duties.

(3) CENVAT credit of the specified duties taken by a sender premises shall not be denied or varied in respect of any inputs or capital goods,—

      (a)  removed as such under sub-rule (1) on the ground that the said inputs or the capital goods have been removed without payment of an amount specified in sub-rule (5) of rule 3 of these rules; or

      (b)  on the ground that the said inputs or capital goods have been used in the manufacture of any intermediate goods removed without payment of duty under sub-rule (1) of rule 12BB of Central Excise Rules, 2002.

Explanation : For the purpose of this sub-rule “intermediate goods” shall have the same meaning assigned to it in sub-rule (1) of rule 12BB of the Central Excise Rules, 2002.

(4) A large taxpayer may transfer, CENVAT credit available with one of his registered manufacturing premises or premises providing taxable service to his other such registered premises by,—

       (i)  making an entry for such transfer in the record maintained under rule 9;

      (ii)  issuing a transfer challan containing registration number, name and address of the registered premises transferring the credit as well as receiving such credit, the amount of credit transferred and the particulars of such entry as mentioned in clause (i),

and such recipient premises can take CENVAT credit on the basis of such transfer challan as mentioned in clause (ii):

Provided that such transfer or utilisation of CENVAT credit shall be subject to the limitations prescribed under clause (b) of sub-rule (7) of rule 3 :

Provided further that nothing contained in this sub-rule shall be applicable if the registered manufacturing premises is availing following notifications of Government of India in the Ministry of Finance (Department of Revenue),—

       (i)  No. 32/99-Central Excise, dated the 8th July, 1999 [G.S.R. 508(E), dated the 8th July, 1999];

      (ii)  No. 33/99-Central Excise, dated the 8th July, 1999 [G.S.R. 509(E), dated the 8th July, 1999];

     (iii)  No. 39/2001-Central Excise, dated the 31st July, 2001 [G.S.R. 565(E), dated  the 31st July, 2001];

     (iv)  No. 56/2002-Central Excise, dated the 14th November, 2002 [G.S.R. 764(E), dated the 14th November, 2002];

      (v)  No. 57/2002-Central Excise, dated the 14th November, 2002 [G.S.R. 765(E), dated the 14th November, 2002];

       (vi)  No. 56/2003-Central Excise, dated the 25th June, 2003 [G.S.R. 513(E), dated the 25th June, 2003];

      (vii)  No. 71/2003-Central Excise, dated the 9th September, 2003 [G.S.R. 717(E), dated the 9th September, 2003]; and

⁵⁵[(viii)  No. 20/2007-Central Excise, dated the 25th April, 2007 [G.S.R. 307(E), dated the 25th April, 2007].]

(5) A large taxpayer shall submit a monthly return, as prescribed under these rules, for each of the registered premises.

(6) Any notice issued but not adjudged by any of the Central Excise Officer administering the Act or rules made thereunder immediately before the date of grant of acceptance by the Chief Commissioner of Central Excise, Large Taxpayer Unit, shall be deemed to have been issued by Central Excise Officers of the said unit.

(7) Provisions of these rules, in so far as they are not inconsistent with the provisions of this rule shall mutatis mutandis apply in case of a large taxpayer.]

 

 

⁵⁶[Power to impose restrictions in certain types of cases.

12AA. Notwithstanding anything contained in these rules, where the Central Government, having regard to the extent of misuse of CENVAT credit, nature and type of such misuse and such other factors as may be relevant, is of the opinion that in order to prevent the misuse of the provisions of CENVAT credit as specified in these rules, it is necessary in the public interest to provide for certain measures including restrictions on a manufacturer, first stage and second stage dealer or an exporter, may by a notification in the Official Gazette, specify nature of restrictions including restrictions on utilization of CENVAT credit and suspension of registration in case of a dealer and type of facilities to be withdrawn and procedure for issue of such order by an officer authorized by the Board.]

 

Power of Central Government to notify goods for deemed CENVAT credit.

13. Notwithstanding anything contained in rule 3, the Central Government may, by notification, declare the input or input service on which the duties of excise, or additional duty of customs or service tax paid, shall be deemed to have been paid at such rate or equivalent to such amount as may be specified in that notification and allow CENVAT credit of such duty or tax deemed to have been paid in such manner and subject to such conditions as may be specified in that notification even if, in the case of input, the declared input, or in the case of input service, the declared input service, as the case may be, is not used directly by the manufacturer of final products, or as the case may be, by the provider of taxable service, declared in that notification, but contained in the said final products, or as the case may be, used in providing the taxable service.

 

Recovery of CENVAT credit wrongly taken or erroneously refunded.

14. Where the CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest shall be recovered from the manufacturer or the provider of the output service and the provisions of sections 11A and 11AB of the Excise Act or sections 73 and 75 of the Finance Act, shall apply mutatis mutandis for effecting such recoveries.

 

Confiscation and penalty.

15. (1) If any person, takes CENVAT credit in respect of input or capital goods, wrongly or ⁵⁷[in contravention of] any of the provisions of these rules in respect of any input or capital goods, then, all such goods shall be liable to confiscation and such person, shall be liable to a penalty not exceeding the duty on the excisable goods in respect of which any contravention has been committed, or ⁵⁸[two] thousand rupees, whichever is greater.

(2) In a case, where the CENVAT credit in respect of input or capital goods has been taken or utilized wrongly on account of fraud, wilful mis-statement, collusion or suppression of facts, or contravention of any of the provisions of the Excise Act or the rules made thereunder with intention to evade payment of duty, then, the manufacturer shall also be liable to pay penalty in terms of the provisions of section 11AC of the Excise Act.

(3) If any person, takes CENVAT credit in respect of input services, wrongly or ⁵⁹[in contravention of any of the provisions of these rules] in respect of any input service, then, such person, shall be liable to a penalty which may extend to an amount not exceeding ⁶⁰[two] thousand rupees.

(4) In a case, where the CENVAT credit in respect of input services has been taken or utilized wrongly by reason of fraud, collusion, wilful mis-statement, suppression of facts, or contravention of any of the provisions of the Finance Act or of the rules made thereunder with intention to evade payment of service tax, then, the provider of output service shall also be liable to pay penalty in terms of the provisions of section 78 of the Finance Act.

(5) Any order under sub-rule (1), sub-rule (2), sub-rule (3) or sub-rule (4) shall be issued by the Central Excise Officer following the principles of natural justice.

 

Supplementary provision.

16. ⁶¹[(1)] Any notification, circular, instruction, standing order, trade notice or other order issued under the CENVAT Credit Rules, 2002 or the Service Tax Credit Rules, 2002, by the Central Government, the Central Board of Excise and Customs, the Chief Commissioner of Central Excise or the Commissioner of Central Excise, and in force at the commencement of these rules, shall, to the extent it is relevant and consistent with these rules, be deemed to be valid and issued under the corresponding provisions of these rules.

⁶²[(2) References in any rule, notification, circular, instruction, standing order, trade notice or other order to the Cenvat Credit Rules, 2002 and any provision thereof or, as the case may be, the Service Tax Credit Rules, 2002 and any provision thereof shall, on the commencement of these rules, be construed as references to the Cenvat Credit Rules, 2004 and any corresponding provision thereof.]

 

 

2. Export of Services Rules, 2005

 

 

Export of Services Rules, 2005

Notification No. 9/2005-ST, dated 3-3-2005

In exercise of the powers conferred by ¹[sections 93 and 94] of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules, namely :—

Short title and commencement.

1. (1) These rules may be called the Export of Services Rules, 2005.

(2) They shall come into force on the 15th day of March, 2005.

 

Definitions.

2. In these rules, unless the context otherwise requires,—

  (a)  “Act” means the Finance Act, 1994 (32 of 1994);

  (b)  “input” shall have the meaning assigned to it in clause (k) of rule 2 of the CENVAT Credit Rules, 2004;

  (c)  “input service” shall have the meaning assigned to it in clause (l) of rule 2 of the CENVAT Credit Rules, 2004.

 

²[Export of taxable service.

3. (1) Export of taxable services shall, in relation to taxable services,—

   (i)  specified in sub-clauses (d), (p), (q), (v), (zzq), (zzza), (zzzb), (zzzc), ³[(zzzh), (zzzr), (zzzy), (zzzz) and (zzzza)] of clause (105) of section 65 of the Act, be provision of such services as are provided in relation to an immovable property situated outside India;

  (ii)  specified in sub-clauses (a), (f), (h), (i), (j), (l), (m), (n), (o), (s), (t), (u), (w), (x), (y), (z), (zb), (zc), (zi), (zj), (zn), (zo), (zq), (zr), (zt), (zu), (zv), (zw), (zza), (zzc), (zzd), (zzf), (zzg), (zzh), (zzi), (zzl), (zzm), (zzn), (zzo), (zzp), (zzs), (zzt), (zzv), (zzw), (zzx), (zzy), (zzzd), (zzze), (zzzf) and (zzzp) of clause (105) of section 65 of the Act, be provision of such services as are performed outside India:

        Provided that where such taxable service is partly performed outside India, it shall be treated as performed outside India:

^3a[Provided further that where the taxable services referred to in sub-clauses (zzg), (zzh) and (zzi) of clause (105) of section 65 of the Act, are provided in relation to any goods or material or any immovable property, as the case may be, situated outside India at the time of provision of service, through internet or an electronic network including a computer network or any other means, then such taxable service, whether or not performed outside India, shall be treated as the taxable service performed outside India;]

(iii)  specified in clause (105) of section 65 of the Act, but excluding,—

  (a)  sub-clauses (zzzo) and (zzzv);

  (b)  those specified in clause (i) of this rule except when the provision of taxable services specified in sub-clauses (d), (zzzc) and (zzzr) does not relate to immovable property; and

  (c)  those specified in clause (ii) of this rule,

        when provided in relation to business or commerce, be provision of such services to a recipient located outside India and when provided otherwise, be provision of such services to a recipient located outside India at the time of provision of such service:

        Provided that where such recipient has commercial establishment or any office relating thereto, in India, such taxable services provided shall be treated as export of service only when order for provision of such service is made from any of his commercial establishment or office located outside India.

⁴[(2) The provision of any taxable service specified in sub-rule (1) shall be treated as export of service when the following conditions are satisfied, namely:—

  (a)  such service is provided from India and used outside India; and

  (b)  payment for such service ⁵[***] is received by the service provider in convertible foreign exchange.

Explanation.—For the purposes of this rule “India” includes the designated areas in the Continental Shelf and Exclusive Economic Zone of India as declared by the notifications of the Government of India in the Ministry of External Affairs numbers S.O. 429(E), dated the 18th July, 1986 and S.O. 643(E), dated the 19th September, 1996.]]

 

Export without payment of service tax.

4. Any service, which is taxable under clause (105) of section 65 of the Act, may be exported without payment of service tax.

 

Rebate of service tax.

5. Where any taxable service is exported, the Central Government may, by notification, grant rebate of service tax paid on such taxable service or service tax or duty paid on input services or inputs, as the case may be, used in providing such taxable service and the rebate shall be subject to such conditions or limitations, if any, and fulfilment of such procedure, as may be specified in the notification.

 

 

3. Taxation of Services (Provided from Outside India and Received in India) Rules, 2006

 

 

Taxation of services (Provided from outside India and received in India) Rules, 2006

NOTIFICATION NO. 11/2006-Service Tax, Dated 19-4-2006

In exercise of the powers conferred by sections 93 and 94, read with section 66A of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules, namely:—

Short title and commencement.

1. (1) These rules may be called the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006.

(2) They shall come into force on the date of their publication in the Official Gazette.

 

Definitions.

2. In these rules, unless the context otherwise requires,—

      (a)  “Act” means the Finance Act, 1994 (32 of 1994);

      (b)  “input” shall have the meaning assigned to it in clause (k) of rule 2 of the CENVAT Credit Rules, 2004;

      (c)  “input service” shall have the meaning assigned to it in clause (l) of rule 2 of the CENVAT Credit Rules, 2004;

      (d)  “output service” shall have the meaning assigned to it in clause (p) of rule 2 of the CENVAT Credit Rules, 2004;

      (e)  “India” includes the designated areas in the Continental Shelf and Exclusive Economic Zone of India as declared by the notifications of the Government of India in the Ministry of External Affairs numbers S.O. 429(E), dated the 18th July, 1986 and S.O. 643(E), dated the 19th September, 1996;

       (f)  words and expressions used in these rules and not defined, but defined in the Act shall have the meanings respectively assigned to them in the Act.

 

Taxable services provided from outside India and received in India.

3. Subject to section 66A of the Act, the taxable services provided from outside India and received in India shall, in relation to taxable services—

       (i)  specified in sub-clauses (d), (p), (q), (v), (zzq), (zzza), (zzzb), (zzzc), ¹[(zzzh), (zzzr), (zzzy), (zzzz) and (zzzza)] of clause (105) of section 65 of the Act, be such services as are provided or to be provided in relation to an immovable property situated in India;

      (ii)  specified in sub-clauses (a), (f), (h), (i), (j), (l), (m), (n), (o), (s), (t), (u), (w), (x), (y), (z), (zb), (zc), (zi), (zj), (zn), (zo), (zq), (zr), (zt), (zu), (zv), (zw), (zza), (zzc), (zzd), (zzf), (zzg), (zzh), (zzi), (zzl), (zzm), (zzn), (zzo), (zzp), (zzs), (zzt), (zzv), (zzw), (zzx), (zzy), (zzzd), (zzze), (zzzf) and (zzzp) of clause (105) of section 65 of the Act, be such services as are performed in India:

            Provided that where such taxable service is partly performed in India, it shall be treated as performed in India and the value of such taxable service shall be determined under section 67 of the Act and the rules made thereunder:

            ²[Provided further that where the taxable services referred to in sub-clauses (zzg), (zzh) and (zzi) of clause (105) of section 65 of the Act, are provided in relation to any goods or material or any immovable property, as the case may be, situated in India at the time of provision of service, through internet or an electronic network including a computer network or any other means, then such taxable service, whether or not performed in India, shall be treated as the taxable service performed in India;]

     (iii)  specified in clause (105) of section 65 of the Act, but excluding,—

              (a)  sub-clauses (zzzo) and (zzzv);

              (b)  those specified in clause (i) of this rule except when the provision of taxable services specified in clauses (d), (zzzc) and (zzzr) does not relate to immovable property; and

              (c)  those specified in clause (ii) of this rule,

be such services as are received by a recipient located in India for use in relation to business or commerce.

 

Registration and payment of service tax.

4. The recipient of taxable services provided from outside India and received in India shall make an application for registration and for this purpose, the provisions of section 69 of the Act and the rules made thereunder shall apply.

 

Taxable services not to be treated as output services.

5. The taxable services provided from outside India and received in India shall not be treated as output services for the purpose of availing credit of duty of excise paid on any input or service tax paid on any input services under CENVAT Credit Rules, 2004.

 

 

4. Service Tax (Registration of Special Category of Persons) Rules, 2005

 

Service tax (registration of special category of persons) rules, 2005

Notification No. 27/2005-S.T., dated 7-6-2005

In exercise of the powers conferred by sub-sections (1) and (2) of section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules, namely:—

Short title and commencement.

1. (1) These rules may be called the Service Tax (Registration of Special Category of Persons) Rules, 2005.

(2) They shall come into force on the 16th day of June, 2005.

 

Definitions.

2. In these rules, unless the context otherwise requires,—

  (a)  “Act” means the Finance Act, 1994 (32 of 1994);

  (b)  “aggregate value of taxable service” means the sum total of first consecutive payments received during a financial year towards the gross amount, as prescribed under section 67 of the Act, charged by the service provider towards taxable services but does not include payments received towards such gross amount which are exempt from the whole of service tax leviable thereon under section 66 of the Act under any notification other than Notification No. 6/2005-Service Tax, dated the 1st March, 2005 [G.S.R. 140(E), dated the 1st March, 2005];

  (c)  “input service distributor” shall have the meaning assigned to it in clause (m) of rule 2 of the CENVAT Credit Rules, 2004.

 

Registration.

3. (1) The input service distributor shall make an application to the jurisdictional Superintendent of Central Excise in such form as may be specified, by notification, by the Board, for registration within a period of thirty days of the commencement of business or the 16th day of June, 2005, whichever is later.

(2) Any provider of taxable service whose aggregate value of taxable service in a financial year exceeds ¹[nine] lakh rupees shall make an application to the jurisdictional Superintendent of Central Excise in such form as may be specified, by notification, by the Board, for registration within a period of thirty days of exceeding the aggregate value of taxable service of ¹[nine] lakh rupees.

(3) The provisions of sub-rules (2) to ²[(8)] of rule 4 of Service Tax Rules, 1994 shall be applicable to the persons or class of persons who make an application for registration under the provisions of these rules, with such modifications and alterations as may be prescribed by the Board.

 

Furnishing of returns.

4. The input service distributor shall furnish a return to the jurisdictional Superintendent of Central Excise in such form and at such frequency as prescribed under sub-rule (10) of rule 9 of CENVAT Credit Rules, 2004.

 

 

 

 

5. Service Tax (Determination of Value) Rules, 2006

 

Service Tax (Determination of Value) Rules, 2006

NOTIFICATION No. 12/2006-Service Tax, Dated 19-4-2006

In exercise of the powers conferred by clause (aa) of sub-section (2) of section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules, namely:—

Short title and commencement.

1. (1) These rules may be called the Service Tax (Determination of Value) Rules, 2006.

(2) They shall come into force on the date of their publication in the Official Gazette.

 

Definitions.

2. In these rules, unless the context otherwise requires,—

      (a)  “Act” means the Finance Act, 1994 (32 of 1994);

      (b)  “section” means the section of the Act;

      (c)  “value” shall have the meaning assigned to it in section 67;

      (d)  words and expressions used in these rules and not defined but defined in the Act shall have the meaning respectively assigned to them in the Act.

 

¹[Determination of value of services involved in the execution of a works contract.

2A. (1) Subject to the provisions of section 67, the value of taxable service in relation to services involved in the execution of a works contract (hereinafter referred to as works contract service), referred to in sub-clause (zzzza) of clause (105) of section 65 of the Act, shall be determined by the service provider in the following manner:—

       (i)  Value of works contract service determined shall be equivalent to the gross amount charged for the works contract less the value of transfer of property in goods involved in the execution of the said works contract.

            Explanation.—For the purposes of this rule,—

              (a)  gross amount charged for the works contract shall not include Value Added Tax (VAT) or sales tax, as the case may be, paid, if any, on transfer of property in goods involved in the execution of the said works contract;

              (b)  value of works contract service shall include,—

                       (i)  labour charges for execution of the works;

                      (ii)  amount paid to a sub-contractor for labour and services;

                     (iii)  charges for planning, designing and architect’s fees;

                     (iv)  charges for obtaining on hire or otherwise, machinery and tools used for the execution of the works contract;

                      (v)  cost of consumables such as water, electricity, fuel, used in the execution of the works contract;

                     (vi)  cost of establishment of the contractor relatable to supply of labour and services;

                    (vii)  other similar expenses relatable to supply of labour and services; and

                   (viii)  profit earned by the service provider relatable to supply of labour and services;

      (ii)  Where Value Added Tax or sales tax, as the case may be, has been paid on the actual value of transfer of property in goods involved in the execution of the works contract, then such value adopted for the purposes of payment of Value Added Tax or sales tax, as the case may be, shall be taken as the value of transfer of property in goods involved in the execution of the said works contract for determining the value of works contract service under clause (i).]

 

Manner of determination of value.

3. Subject to the provisions of section 67, the value of taxable service, where the consideration received is not wholly or partly consisting of money, shall be determined by the service provider in the following manner:—

      (a)  the value of such taxable service shall be equivalent to the gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade and the gross amount charged is the sole consideration;

      (b)  where the value cannot be determined in accordance with clause (a), the service provider shall determine the equivalent money value of such consideration which shall, in no case be less than the cost of provision of such taxable service.

 

Rejection of value.

4. (1) Nothing contained in rule 3 shall be construed as restricting or calling into question the power of the Central Excise Officer to satisfy himself as to the accuracy of any information furnished or document presented for valuation.

(2) Where the Central Excise Officer is satisfied that the value so determined by the service provider is not in accordance with the provisions of the Act or these rules, he shall issue a notice to such service provider to show cause why the value of such taxable service for the purpose of charging service tax should not be fixed at the amount specified in the notice.

(3) The Central Excise Officer shall, after providing reasonable opportunity of being heard, determine the value of such taxable service for the purpose of charging service tax in accordance with the provisions of the Act and these rules.

 

Inclusion in or exclusion from value of certain expenditure or costs.

5. (1) Where any expenditure or costs are incurred by the service provider in the course of providing taxable service, all such expenditure or costs shall be treated as consideration for the taxable service provided or to be provided and shall be included in the value for the purpose of charging service tax on the said service.

(2) Subject to the provisions of sub-rule (1), the expenditure or costs incurred by the service provider as a pure agent of the recipient of service, shall be excluded from the value of the taxable service if all the following conditions are satisfied, namely:—

       (i)  the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured;

      (ii)  the recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service;

     (iii)  the recipient of service is liable to make payment to the third party;

     (iv)  the recipient of service authorises the service provider to make payment on his behalf;

      (v)  the recipient of service knows that the goods and services for which payment has been made by the service provider shall be provided by the third party;

     (vi)  the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service;

    (vii)  the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and

   (viii)  the goods or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account.

Explanation 1.—For the purposes of sub-rule (2), “pure agent” means a person who—

      (a)  enters into a contractual agreement with the recipient of service to act as his pure agent to incur expenditure or costs in the course of providing taxable service;

      (b)  neither intends to hold nor holds any title to the goods or services so procured or provided as pure agent of the recipient of service;

      (c)  does not use such goods or services so procured; and

      (d)  receives only the actual amount incurred to procure such goods or services.

Explanation 2.—For the removal of doubts it is clarified that the value of the taxable service is the total amount of consideration consisting of all components of the taxable service and it is immaterial that the details of individual components of the total consideration is indicated separately in the invoice.

Illustration 1.—X contracts with Y, a real estate agent to sell his house and thereupon Y gives an advertisement in television. Y billed X including charges for television advertisement and paid service tax on the total consideration billed. In such a case, consideration for the service provided is what X pays to Y. Y does not act as an agent on behalf of X when obtaining the television advertisement even if the cost of television advertisement is mentioned separately in the invoice issued by X. Advertising service is an input service for the estate agent in order to enable or facilitate him to perform his services as an estate agent.

Illustration 2.—In the course of providing a taxable service, a service provider incurs costs such as travelling expenses, postage, telephone, etc., and may indicate these items separately on the invoice issued to the recipient of service. In such a case, the service provider is not acting as an agent of the recipient of service but procures such inputs or input service on his own account for providing the taxable service. Such expenses do not become reimbursable expenditure merely because they are indicated separately in the invoice issued by the service provider to the recipient of service.

Illustration 3.—A contracts with B, an architect for building a house. During the course of providing the taxable service, B incurs expenses such as telephone charges, air travel tickets, hotel accommodation, etc., to enable him to effectively perform the provision of services to A. In such a case, in whatever form B recovers such expenditure from A, whether as a separately itemised expense or as part of an inclusive overall fee, service tax is payable on the total amount charged by B. Value of the taxable service for charging service tax is what A pays to B.

Illustration 4.—Company X provides a taxable service of rent-a-cab by providing chauffeur-driven cars for overseas visitors. The chauffeur is given a lump sum amount to cover his food and overnight accommodation and any other incidental expenses such as parking fees by the Company X during the tour. At the end of the tour, the chauffeur returns the balance of the amount with a statement of his expenses and the relevant bills. Company X charges these amounts from the recipients of service. The cost incurred by the chauffeur and billed to the recipient of service constitutes part of gross amount charged for the provision of services by the company X.

 

Cases in which the commission, costs, etc., will be included or excluded.

6. (1) Subject to the provisions of section 67, the value of the taxable services shall include‚—

       (i)  the commission or brokerage charged by a broker on the sale or purchase of securities including the commission or brokerage paid by the stock-broker to any sub-broker;

      (ii)  the adjustments made by the telegraph authority from any deposits made by the subscriber at the time of application for telephone connection or pager or facsimile or telegraph or telex or for leased circuit;

     (iii)  the amount of premium charged by the insurer from the policy holder;

     (iv)  the commission received by the air travel agent from the airline;

      (v)  the commission, fee or any other sum received by an actuary, or intermediary or insurance intermediary or insurance agent from the insurer;

     (vi)  the reimbursement received by the authorised service station, from manufacturer for carrying out any service of any motor car, light motor vehicle or two wheeled motor vehicle manufactured by such manufacturer;

    (vii)  the commission or any amount received by the rail travel agent from the Railways or the customer;

   (viii)  the remuneration or commission, by whatever name called, paid to such agent by the client engaging such agent for the services provided by a clearing and forwarding agent to a client rendering services of clearing and forwarding operations in any manner; and

     (ix)  the commission, fee or any other sum, by whatever name called, paid to such agent by the insurer appointing such agent in relation to insurance auxiliary services provided by an insurance agent.

(2) Subject to the provisions contained in sub-rule (1), the value of any taxable service, as the case may be, does not include—

       (i)  initial deposit made by the subscriber at the time of application for telephone connection or pager or facsimile (FAX) or telegraph or telex or for leased circuit;

      (ii)  the airfare collected by air travel agent in respect of service provided by him;

     (iii)  the rail fare collected by ²[rail] travel agent in respect of service provided by him; and

     (iv)  interest on loans.

 

Actual consideration to be the value of taxable service provided from outside India.

7. (1) The value of taxable service received under the provisions of section 66A, shall be such amount as is equal to the actual consideration charged for the services provided or to be provided.

(2) Notwithstanding anything contained in sub-rule (1), the value of taxable services specified in clause (ii) of rule 3 of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, as are partly performed in India, shall be the total consideration paid by the recipient for such services including the value of service partly performed outside India.

 

 

6. Works Contract (Composition Scheme) Rules, 2007

 

Works contract (Composition scheme for payment of service tax) Rules, 2007

Notification No. 32/2007-ST, dated 22-5-2007

In exercise of the powers conferred by sections 93 and 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules, namely:—

Short title and commencement.

1. (1) These rules may be called the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007.

(2) They shall come into force with effect from the 1st day of June, 2007.

 

Definitions.

2. In these rules, unless the context otherwise requires,—

  (a)  “Act” means the Finance Act, 1994 (32 of 1994);

  (b)  “section” means the section of the Act;

  (c)  “works contract service” means services provided in relation to the execution of a works contract referred to in sub-clause (zzzza) of clause (105) of section 65 of the Act;

  (d)  words and expressions used in these rules and not defined but defined in the Act shall have the meanings respectively assigned to them in the Act.

 

3. (1) Notwithstanding anything contained in section 67 of the Act and rule 2A of the Service Tax (Determination of Value) Rules, 2006, the person liable to pay service tax in relation to works contract service shall have the option to discharge his service tax liability on the works contract service provided or to be provided, instead of paying service tax at the rate specified in section 66 of the Act, by paying an amount equivalent to ¹[four] per cent of the gross amount charged for the works contract.

Explanation.—For the purposes of this rule, gross amount charged for the works contract shall not include Value Added Tax (VAT) or sales tax, as the case may be, paid on transfer of property in goods involved in the execution of the said works contract.

(2) The provider of taxable service shall not take CENVAT credit of duties or cess paid on any inputs, used in or in relation to the said works contract, under the provisions of CENVAT Credit Rules, 2004.

(3) The provider of taxable service who opts to pay service tax under these rules shall exercise such option in respect of a works contract prior to payment of service tax in respect of the said works contract and the option so exercised shall be applicable for the entire works contract and shall not be withdrawn until the completion of the said works contract.

 

 

7. Service Tax (Advance Rulings) Rules, 2003

 

Service Tax (Advance Rulings)  Rules, 2003

Notification No. 17/2003-ST, Dated 23-7-2003

In exercise of the powers conferred by section 96-I read with sub-sections (1) and (3) of section 96C, sub-section (7) of section 96D of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules, namely:—

Short title, extent and commencement.

1. (1) These rules may be called the Service Tax (Advance Rulings) Rules, 2003.

(2) They extend to the whole of India, except the State of Jammu and Kashmir.

(3) They shall come into force on the date of their publication in the Official Gazette.

 

Definitions.

2. In these rules, unless the context otherwise requires,—

  (a)  “Act” means the Finance Act, 1994 (32 of 1994);

  (b)  “Authority” means the Authority for Advance Rulings ¹[(Central Excise, Customs and Service Tax)] constituted under section 28F of the Customs Act, 1962 (52 of 1962);

  (c)  “Form - Application for Advance Ruling (Service Tax)” means the form annexed to these rules;

  (d)  Words and expressions used and not defined herein but defined in the Act shall have the meanings respectively, assigned, to them in the Act.

 

Form and manner of application.

3. (1) An application for obtaining an advance ruling under sub-section (1) of section 96C of the Act shall be made in Form - Application for Advance Ruling (Service Tax).

(2) The application referred to in sub-rule (1), the verification contained therein and all relevant documents accompanying such application shall be signed,—

  (a)  in the case of an individual, by the individual himself, or where the individual is absent from India, by the individual concerned or by some person duly authorized by him in this behalf; and where the individual is a minor or is mentally incapacitated from attending to his affairs, by his guardian or by any other person competent to act on his behalf;

  (b)  in the case of a Hindu undivided family, by the karta of that family and, where the karta is absent from India or is mentally incapacitated from attending to his affairs, by any other adult member of that family;

  (c)  in the case of a company or local authority, by the principal officer thereof authorized by the company or the local authority, as the case may be, for such purpose;

  (d)  in the case of a firm, by any partner thereof, not being a minor;

  (e)  in the case of an association, by any member of the association or the principal officer thereof; and

   (f)  in the case of any other person, by that person or some person competent to act on his behalf.

(3) Every application shall be filed in quadruplicate and shall be accompanied by a fee of two thousand five hundred rupees.

 

Certification of copies of the Advance Rulings pronounced by the Authority.

4. A copy of the advance ruling pronounced by the Authority for Advance Rulings and duly signed by the Members to be sent to each of the applicant and to the Commissioner of Central Excise under sub-section (7) of section 96D of the Act, shall be certified to be true copy of its original by the Commissioner, Authority for Advance Rulings, or any other officer duly authorized by the Commissioner, Authority for Advance Rulings, as the case may be.

²FORM-AAR (ST-I)

[Application for Advance Ruling (Service Tax)] [See rule 3 of the Service Tax (Advance Rulings) Rules, 2003]

Before the Authority for Advance Rulings (Central Excise, Customs and Service Tax) New Delhi

(Form of application for seeking Advance Ruling under section 96C of the Finance Act, 1994) Application Number ...... of .........

(Applicant’s signature)

Verification

I, ....................(name in full and in block letters), son/daughter/wife of ................... do hereby solemnly declare that to the best of my knowledge and belief what is stated above and in the annexure(s), including the documents are correct. I am making this application in my capacity as ................... (designation) and that I am competent to make this application and verify it.

2. I also declare that the question(s) on which the advance ruling is sought is/are not pending in my case before any Central Excise/Service Tax Authority, Appellate Tribunal or any Court.

3. Verified this.......day of.......200 ........at .....

(Applicant’s signature)

Annexure I

Statement of the relevant facts having a bearing on the question(s) on which the advance ruling is required

Place .............................

Date ..............................

(Applicant’s signature)

Annexure II

Statement containing the applicant’s interpretation of law and/or facts, as the case may be, in respect of the question(s) on which advance ruling is required

Place .............................

Date ..............................

(Applicant’s signature)