Eligible ‘Capital Goods’
Cenvat credit is available on inputs as well as capital goods. Some provisions are common while there are
some specific provisions in respect of Cenvat on capital goods. General provisions applicable to both inputs
and capital goods are discussed in other chapter. The specific provisions in respect of capital goods are
Capital Goods eligible to a manufacturer or service provider – Manufacturers and service providers are eligible
to avail Cenvat credit of capital goods used by them.
Use of Capital Goods –
The capital goods should be used – (a) 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.
Purpose for which Capital Goods used by Manufacturer is immaterial –
The Capital goods can be used within factory for any purpose
Depreciation can be taken on 50% of Cenvat credit in first year?
In the first year, the assessee avails credit of only 50% of excise duty. The restriction in rule 4(4) regarding
depreciation is only in respect of duty of which Cenvat credit has been taken. Hence, in Suprajit Engineering Ltd.
v. CCE (2007) 6 STR 170 = 212 ELT 394 (CESTAT), it has been held that there is no violation of rule if assessee
claims depreciation on the balance 50% of duty, since he has not availed credit of that amount in first year –
followed in Roots Cast v. CCE (2007) 216 ELT 448 (CESTAT SMB).
Sending out of capital goods by service provider –
Service provider can send out capital goods for providing output service. There is no requirement that these
should be brought back within 180 days.
Following are the ‘capital goods’, vide rule 2(a)(i) of Cenvat Credit Rules –
(i) Tools, hand tools, knives etc. failing under chapter 82, Machinery covered under chapter 84, Electrical
machinery under chapter 85, Measuring, checking and testing machines etc, falling under chapter 90, Grinding wheels and the like goods falling under sub-heading No. 6801.10, Abrasive powder or grain on
a base of textile material, falling under chapter heading 68,02.
(ii) Pollution control equipment.
(iii) Components, spares and accessories of the goods specified above.
(iv) Moulds and dies.
(v) Refractories and refractory material.
(vi) Tubes, pipes and fittings thereof, used in the factory.
(vii) Storage Tank.