F.No. 267/12/2002-CX-8
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs

Subject: Admissibility of CENVAT credit to inputs and capital goods used by the manufacturer outside the factory premises.

            Board’s attention has been drawn to the Supreme Court judgement in Civil Appeal No.5340-5341 of 2000 in the case of M/s. Jaypee Rewa Cement wherein the Apex Court has held that MODVAT credit on explosives used in mines (which are outside the factory premises) for mining of lime stone (intermediate product) shall be available to the manufacturing unit under Rule 57 J of the erstwhile Central Excise Rules, 1944. Accordingly, the matter of admissibility of Cenvat credit on inputs and capital goods when these are used outside the factory of manufacture of final product has been reviewed by Board in the light of new CENVAT Rules which came into force w.e.f. 1.7.2001

2.            It has been observed by the Board that ‘inputs’ have been defined under Rule 2(f) of Cenvat Credit Rules, 2001 as below:

"Inputs means all goods except High speed Diesel Oil & motor spirit used in relation to the manufacture of final products whether directly or indirectly & whether contained in the final product or not……………….used for manufacture of final products or for any other purpose, within the factory of production."

3.            Similarly, Capital goods have been defined under Rule 2(b) of said Rules as those items which are used in the factory of the manufacturer of final products. Moreover, as per Rule 3(1) of the said Rules, credit on inputs is also admissible when inputs are used in the manufacture of intermediate products by a job worker availing the benefit of notification No.214/86-CE dated 25.3.86. Further, in terms of Rule 4(5), capital goods may be sent to a job worker’s premises for production of goods. Therefore, in view of the said statutory provisions contained in Cenvat credit Rules, 2001 cited above, Cenvat Credit is admissible only when the inputs or Capital goods are used by the manufacturer within the factory premises [except when inputs or capital goods are used/sent for job work outside factory]. This position remains unchanged in the present Cenvat Credit Rules, 2002.