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Definition of Capital Goods and analysis Under Cenvat Credit Rules

Manufacturers and service providers are entitled to avail cenvat credit on capital goods used by them. Capital Goods Means

A]  The following goods, namely

  • All goods falling under chapter 82,84,85,90, heading no.6805, grinding wheels and the like, and parts thereof falling under heading 6804 of the first schedule of Excise Tariff Act.
  • Pollution control Equipment’s
  • Components, spares, accessories of the goods specified in above two
  • Molds and dies, jigs and fixtures *Refractories and refractory material
  • Tubes, pipes and fittings thereof / *Storage tank and
  • Motor Vehicles other than those falling under tariff headings 8702,8703,8704,8711 and their chassis but including dumpers and trippers

 Used in

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

ii)Outside the factory of manufacturer of the final products for generation of electricity for captive use within the factory;or

iii)For providing output service

Vehicles falling under heading

8702 (Motor vehicles for transport),

8703 (Motor Cars and vehicles for passengers),

8704 (Motor vehicles of transport of goods),

8711 (Motor cycles) are not eligible for CENVAT credit for manufacturers and for service providers.

B] Motor vehicle designed for transportation of goods, including their chassis registered in the name of service provider, when used for (i) providing output service of renting of such motor vehicle ; or (ii)  transportation of inputs and capital goods used for providing an output service; or (iii) providing output service of courier agency.

C] Motor vehicle designed to carry passengers including their chassis, registered in the name of provider of service, when used for providing output service of  (i) transportation of passengers or (ii) renting of such motor vehicles or (iii) imparting motor driving skills

D] Components, spares and accessories of motor vehicles which are capital goods for the assessee.

  • Following capital goods are covered in clause A(i)
  • Tools, Hand tools, knives falling under Chapter 82
  • Machineries covered under chapter 84
  • Electrical Machinery under chapter 85
  • Measuring, testing & checking machines under chapter 90
  • Grinding wheels and the like, and parts thereof falling under subheading no.6804
  • Abrasive powder or grain on a base of textile material of paper board or other materials falling under chapter heading 6805
  • The capital goods must be used in a factory of manufacturer but does not include appliances used in office.
  • Capital goods procured under hire purchase, lease or loan agreement from a financing company are eligible for Cenvat credit. In such cases, it is advisable that the invoice issued by a manufacturer of capital goods demonstrates the name of manufacturer as consignee even though the invoice will be in the name of financing company.
Accessories and goods used for providing free warrantyRefer Rule 2(k) of CCR 2004,

value included in final product vs. value charged separatelyX Ltd. Who is manufacturer has paid following amounts, whether CENVAT credit is eligible :-

i)Customs Duty

ii)CVD u/s 3(1) of the customs Tariff Act – popularly called as “Additional Duty”

iii)Safeguard Duty

iv)EC & SHEC paid with reference to Customs Duty whether allowedNot Eligible


Not Eligible

Not EligibleWhether X Ltd. Could have availed CENVAT credit of “ additional duty” if he would have been service providerYes

Eligibility of service providers as well

Payment Solutions and Systems and Risk Management

Definition of Capital Goods and analysis Under Cenvat Credit Rules

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