1)  Define “inputs” 

                     “Inputs” include all goods used in or in relation to the 
               manufacture of  final products whether directly or indirectly, whether 
               contained in the final product or not. (Rule 2).

        2)  Define “capital goods”

             “Capital goods” means      

       i)               all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, Chapter Heading No. 68.02 and Chapter sub-heading No. 6801.10 of the First Schedule to the Central Excise Tariff Act, 1985;

      ii)              Pollution Control Equipments;

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

     iv)                Moulds and dies;

     v)                  Refractories and refractory materials;

    vi)                Tubes and pipes and fittings thereof and

    vii)              Storage tank

                      used in the factory of the manufacturer of the final products but 
                      does not include any equipment or appliance used in an office.
                      (Rule 2).   

          3)   What are “final products”?

            “Final products” are defined as excisable goods manufactured from 
             inputs, except matches. (Rule 2).

         4)   What is the definition of  “exempted goods”?

              “Exempted goods” means 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. (Rule 2).     

        5)    What are the duties allowed as CENVAT credit to a 
                manufacturer or producer of final products?

                A manufacturer or producer of final products shall be allowed to    
                take credit of

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

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

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

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

       v)   the National Calamity Contingent Duty leviable under Section 136 of the Finance Act, 2001 and

       vi)  the additional duty leviable under Section 3 of the Customs Tariff Act, 1975 equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv) and (v) above paid on any inputs or capital goods received in the factory.  (Rule 3).

           6)    What are the conditions for allowing CENVAT Credit?

               I) The CENVAT credit in respect of inputs may be taken 
                   immediately on receipt of the inputs in the factory of the 
                   manufacturer.

              II (a) The CENVAT credit in respect of capital goods received in a 
                       factory 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. 

             II (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, if the 
                       capital  goods, other than components, spares and 
                       accessories, refractories and refractory materials and goods 
                       falling under heading No. 68.02 and sub-heading No. 6801.10 
                       of the First Schedule  to the Tariff Act are in the possession 
                       and use of the manufacturer of final products in such
                      subsequent years.

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

            IV)  The CENVAT credit in respect of capital goods shall not be 
                   allowed if the manufacturer claims depreciation on that part of the 
                   value of such capital goods that represents the amount of duty on
                   such capital goods.

           V)  The CENVAT credit is 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 or any
                 other purpose subject to the condition that the goods are received 
                 back in the factory within one hundred and eighty days of their 
                 being sent to a job worker.  If the inputs or the capital goods are
                 not received within one hundred and eighty days, the manufacturer 
                 shall pay an amount equivalent to the CENVAT credit taken.  But 
                 the manufacturer can take the CENVAT credit again when the
                 inputs or capital goods are received back min his factory.

          VI) The Commissioner of Central Excise having jurisdiction over the 
                factory of the manufacturer of final products who has sent the inputs 
                or the partially processed inputs to a job worker may allow final
                products to be cleared from the premises of the job worker subject 
                to such conditions he may impose in the interest of Revenue 
                including the manner of payment of duty.  

 (Rule 4). 

          7)  Explain the situation where CENVAT credit is refunded.

                     If a manufacturer is unable to utilise CENVAT credit taken on 
               inputs for reasons of having no clearances for home consumption or 
               not exporting on payment of duty, such accumulated CENVAT
               credit will be refunded to him subject to safeguards, conditions and 
                limitations specified by the Central Government by notification.   

(Rule 5).

          8)  What is the obligation of the manufacturer of dutiable and exempted goods?  

          a)    The CENVAT credit shall not be allowed on inputs used in the 
                manufacture of exempted goods.

    b)      If a manufacturer avails CENVAT credit on inputs other than fuel and manufactures both dutiable and exempted goods, then he shall maintain separate accounts for receipt, consumption and inventory of inputs meant for use in the dutiable final products and the quantity of inputs meant for use in the manufacture of exempted goods and take CENVAT credit only on that quantity of inputs which is intended for use in the manufacture of dutiable goods.

    c)     The manufacturer, opting not to maintain separate accounts shall follow either of the following conditions, as applicable to him:

i)                    if the exempted goods are as described in sub-rule (3) (a) of Rule 6 of CENVAT Credit Rules, 2002, the manufacturer shall pay an amount equivalent to the CENVAT credit attributable to inputs used in or in relation to the manufacture of such final products at the time of clearance from the factory; or

ii)                  if the exempted goods are other than those described in (i), the manufacturer shall pay an amount equal to eight per cent of the total price, excluding sales tax and other taxes, if any paid on such goods, of the exempted final product charged by the manufacturer for the sale of such goods at the time of their clearance from the factory.

 d)         No CENVAT credit is allowed on capital goods, which are used exclusively in the manufacture of   exempted goods.  But this provision will not apply if exemption is granted to such goods based on the value or quantity of clearances made in a financial year.

    e)     None of the above provisions shall apply in case the exempted goods are either-

i)       cleared to a unit in a free trade zone; or

ii)     cleared to a unit in a special economic zone; or

iii)   cleared to a hundred per cent export oriented undertaking; or

iv)    cleared to a unit in an Electronic Hardware Technology Park or Software Technology Park; or

v)      supplied to the United Nations or an international organization for their official use or supplied to projects funded by them in terms of Notification No. 108/95-CE dated 28.08.1995; or

vi)    cleared for the export under bond.

vii)  Gold or silver falling within Chapter 71 of the First Schedule arising in the course of manufacture of copper or zinc by smelting.   

                                                                                              (Rule 6)  

                9)  Whether the storage of inputs outside the factory of the manufacturer is permitted?

                       The Assistant/Deputy Commissioner of Central Excise having 
               jurisdiction over the factory of a manufacturer of final products may, 
               in exceptional circumstances having regard to the nature of the
              goods and shortage of storage space at the premises of the 
              manufacturer, permit such manufacturer to store the inputs on which 
              CENVAT credit has been taken, outside the factory subject to such
              limitations and conditions specified by him.

                     If such inputs are not used in the manner prescribed in the 
             CENVAT Credit Rules, 2002 for any reason, the manufacturer of the 
             final products shall pay an amount equal to the credit availed in
             respect of such inputs. 

(Rule 6A)

             10)   What are the documents on the basis of which CENVAT credit may be taken by a
                      manufacturer of the final products?  

                     i)    an invoice issued by-

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

  b)     a manufacturer of final products for the removal of inputs or capital goods as such;

  c)      an importer

  d)     an importer from his registered depot or from the registered premises of the consignment agent of the said importer;

 e)     a first stage dealer or a second stage dealer of excisable or imported goods;

ii)      a supplementary invoice issued by a manufacturer or importer of inputs or capital goods from his factory or from his 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 or Customs duties has been paid.  But this provision will not apply in cases where the additional duties become payable on account of any non-levy or short levy by reason of fraud, collusion or any willful mis-statement or suppression of facts or contravention of the Act or the rules made thereunder with intent to evade payment of duty;

         iii)      a biil of entry;

         iv)      a certificate issued by an appraiser of customs in respect of goods imported through a  
    Foreign Post Office.    

(Rule 7)

             11)   What are the reasonable steps a manufacturer taking 
                      CENVAT credit on inputs or capital goods shall take to 
                      ensure that appropriate duty of excise has been paid on
                      the inputs or capital goods received by him?

                             A manufacturer taking CENVAT credit on inputs or capital 
                     goods received by him shall be deemed to have taken 
                     reasonable steps if he satisfies himself about the identity and 
                     address of the manufacturer or supplier, as the case may be, 
                     issuing the document specified in Rule 7, evidencing the  be,
                     payment of excise duty or the additional duty of customs, as the 
                     case may either-

a)     from his personal knowledge; or

b)     on the strength of a certificate given by a person with whose handwriting or signature he is familiar; or

c)      on the strength of a certificate issued to the manufacturer or the supplier, as the case may be, by the Superintendent of Central Excise within whose jurisdiction such manufacturer has his factory or the supplier has his place of business.

                               The manufacturer or producer taking CENVAT credit shall 
                        retain such certificate for production before the proper officer 
                        on demand.

(Rule 7)

              12)     What are the records to be maintained by the manufacturer of final products? 

                                 The manufacturer of final products shall maintain proper 
                         records for the receipt, disposal, consumption and inventory of 
                         the inputs and capital goods and in such records information
                        regarding the value, duty paid, the person from whom the 
                        inputs or capital goods have been procured is to be recorded.  
                        The burden of proof regarding the admissibility of the 
                         CENVAT credit shall lie upon the manufacturer taking credit.  
                         A monthly return within ten days from the close of each month 
                         has to be submitted to the Superintendent of Central Excise 
                         by the manufacturer of final products.

(Rule 7)

           13)   When shall the transfer of CENVAT credit allowable?

                           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.  But such transfer of credit 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 to the new site or 
                ownership and the inputs or capital goods on which credit has been 
                taken are duly accounted to the satisfaction of Commissioner, 
                Assistant /Deputy Commissioner of Central Excise, as the case 
                may be.  

  (Rule 8).

         14)    Please explain transitional provisions.

                         As per these provisions, any amount of credit earned by a 
                 manufacturer under erstwhile Central Excise Rules, 1994 as they 
                 existed prior to the 1^st day of July 2001 and remaining
                unutilized on that day shall be allowable as CENVAT credit to such 
                manufacturer and he shall be allowed to utilize such credit.   

                       If a manufacturer opts for exemption from whole of the duty of 
                excise leviable on goods manufactured by him under SSI 
                notification in a financial year, he 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 used in any final products lying in 
                stock on the date when such option is exercised.  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.

(Rule 9)

        15)     What is deemed credit?

                The Central Government may, by notification, declare the inputs on which the duties of excise, or additional duty of customs paid, shall be deemed to have been paid at such rate or equivalent to such amount as may be specified in the said notification and allow CENVAT credit of such duty deemed to have been paid in such manner and subject to such conditions as may be specified in the said notification even if the declared inputs are not used directly by the manufacturer of final products declared in the said notification, but are contained in the said final products.

(Rule 11)

          16)    What action shall be taken to recover CENVAT credit wrongly taken?

                      If a manufacturer takes CENVAT credit wrongly or utilizes such 
              credit wrongly, the same shall be recovered from such manufacturer 
              under the provisions of Rule 12 of the CENVAT Credit Rules, 2002 
              read with the provisions of Section 11A of the Central Excise Act,   
             1944.  In addition to therecovery of wrong credit, interest on such 
              wrong credit shall also be recovered under the provisions of
             Rule 12 of the said Rules read with Section 11AB of the said Act.

(Rule 12)

           17)    What is the penal provision under which a person taking wrong CENVAT credit may be
                      proceeded against?

                           If any person takes CENVAT credit wrongly or without taking 
                reasonable steps to ensure appropriate duty on the inputs or 
                capital goods has been paid or contravenes any of the provisions
               of CENVAT Credit Rules, 2002 in respect of any inputs 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 such
               excisable goods or ten thousand rupees, whichever is higher.

                          In a case, where CENVAT credit has been taken or utilised 
              wrongly on account of fraud, willful misstatement, collusion or 
              suppression of facts or contravention of any of the provisions of the 
              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 Central Excise Act, 
              1944.

(Rule 13)