Rule 6. Obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services.

(1) The CENVAT credit shall not be allowed on such quantity of input used in or relation or in relation to the manufacture of e empted !oods or for pro"isions of e empted ser"ices or input ser"ice used in or in relation to the manufacture of e empted !oods and their clearance up to the place of remo"al or for the pro"isions of e empted ser"ices e cept in the in the circumstances mentioned in sub#rule ($). Provided that the CENVAT credit on inputs shall not be denied to %ob wor&er referred to in rule 1$AA of the Central E cise 'ules( $))$( on the !round that the said inputs are used in the manufacture of !oods cleared without payment of duty under the pro"isions of that rule. E planation to the abo"e para!raph*# REVERSAL IF FI AL PRO!"#$ S"%SE&"E $L' E(E)P$ CENVAT Credit is ta&en as soon as !oods enter factory premises. +inal product may be cleared later. ,t may happen that the final product may be subsequently e empt (conditionally or unconditionally). At that time( some inputs (on which CENVAT has been a"ailed will be in stoc&. These inputs will be used for manufacture of e empted final product( if he decides to a"ail the e emption (in case of conditional e emption). ,n case of unconditional e emption( it is mandatory for him to a"ail e emption. ,n such case( basic principle is that CENVAT is a"ailable only if duty is paid on final product. Accordin! to this principle( the CENVAT credit a"ailed on stoc& is required to be re"ersed. The rule ma&es pro"ision only in respect of re"ersal of CENVAT Credit on inputs and not in respect of input ser"ices and capital !oods.

($) -here a manufacturer or pro"ider of output ser"ice a"ails of CENVAT credit in respect of any inputs or input ser"ices( and manufactures such final products or pro"ides such output ser"ice which are char!eable to duty or ta as well as e empted !oods or ser"ices( then( the manufacturer or pro"ider of output ser"ice shall maintain separate accounts for receipt( consumption and in"entory of input used (i) in or in relation to the manufacture of e empted. (ii) in or in relation to the manufacture of dutiable !oods. (iii) for the pro"isions of e empted ser"ices. (i") for the pro"isions of out put ser"ices e cludin! e empted ser"ices and (b) the receipts and use of input ser"ices#(i) in or in relation to the manufacture of e empted !oods and their clearance up to the place of remo"al. (ii) in or in relation to the manufacture of dutiable final products( e cludin! e empted !oods( and their place of remo"al. (iii) for the pro"isions of e empted ser"ices. and (,") for the pro"ision of output ser"ices e cludin! e empted ser"ices and shall ta&e CENVAT credit only on inputs under sub#clauses (ii) and (i") of clause (a) and ser"ices under sub# clauses (ii) and (i") of clause (b)./

E planation to the abo"e para!raph *#

PAR$IAL )A "FA#$"RE*PROVISIO

OF E(E)P$E! PRO!"#$*SERVI#ES

CENVAT Credit of inputs and input ser"ices is not a"ailable if final product 0output ser"ice is e empt from e cise duty0ser"ice ta . ,n case of manufacturer manufacturin! both e empt and dutiable !oods (or ser"ice pro"ider pro"idin! ta able as well as e empt ser"ices)( it may happen that same inputs0input ser"ices are used partly for manufacturin! of dutiable !oods0ta able ser"ices and partly for e empted !oods0ser"ices. ,n such cases( the manufacturer0ser"ice pro"ider has followin! four options with effect from )1.)1.$)11#

(a) 2aintain separate in"entory and accounts of receipts and use of inputs and input ser"ices used
for e empted !oods0e empted output ser"ices 3 '45E 6 ($) 7+ CENVAT C'E8,T '45E9. (b) :ay amount equal to ;< of "alue of e empted !oods (if he is manufacturer) and of "alue of e empted ser"ices (if he is ser"ice pro"ider) 3 '45E 6(=)(i)> The ?amount@ payable was 6< of "alue of e empted ser"ices durin! the period )A#)B#$))B to =1#)=#$)11C. (c) :ay an ?amount@ equal to proportionate CENVAT Credit attributable to e empted final product0e empted output ser"ices( as pro"ided in '45E 6(=A)#'45E 6(=)(ii) of CENVAT Credit 'ules. (d) 2aintain separate accounts for inputs and pay ?amount@ as determined under '45E6(=A) in respect of input ser"ices# '45E 6(=)(iii) of CENVAT Credit 'ules as inserted with effect from )1.)1.$)11. (The last option was not a"ailable up to =1.)=.$)11. +urther( incase of e empted ser"ices the ?amount@ payable was 6<.)

+e are not manufacturing onl, one product -.ic. is exempted/ ot.er-ise -e are not capable to avail t.e benefit of #E VA$ #RE!I$0 +e are manufacturing bot. exempted as -ell as dutiable product from t.e same input0 So/ -e are falling under t.e R"LE 6 123 A ! O$ R"LE 6 143/ $O %E O$E!0 O$ APPLI#A%LE $O "S/ AS PER $5E OPE I 6

)O $5 +ISE REVERSAL %LO 6I 6 $O $5E R"LE 6 17A3 +5I#5 IS

PARA6RAP5 OF R"LE 6173 spea8s as 9 ot-it.standing an,t.ing contained in sub Rule 143 and 123 / t.e manufacturer of goods or t.e provider of output service/ opting not to maintain separate accounts0 S.all follo- :an, one; of t.e follo-ing options as applicable to .im0 9/ t.at is/ Rule173 or Rule 17A30

Please note t.e above explanation for clear cut understanding of t.ese R"LES0