The Cenvat scheme is a system whereby a manufacturer can avail of credit of the duties paid by a manufacturer of his raw materials, inputs, parts and components or his capital goods to pay his own Central Excise Duty.

This is intended to ensure that no manufacturer is forced to pay duty on the duty portion of his product. Briefly, in order to avail the CENVAT credit, the goods manufactured or produced have to pay duty. All inputs if used in the manufacture of the final product are eligible for Cenvat {except high-speed diesel oil and motor spirit (petrol)}.

All capital goods actually used in the manufacture of the final products are also eligible.

All finished goods are eligible for the benefit of Cenvat except matches. However, availment of Cenvat on capital goods will be spread over two years, half in the first year.

A manufacturer availing cenvat on capital goods must not avail depreciation under the income tax act on the duty part of the cost of the capital goods.

An SSI (Small Scale Industry) who is to take the benefit of Cenvat scheme must give a letter of C.Ex. and maintain the appropriate registers. Before availing cenvat, the SSI must physically receive the goods under a duty paying document or a proper invoice issued by a registered dealer. The SSI must maintain an registers giving details of receipt and disposed of inputs & capital goods and payment of duty by credit. Registers. Once he has availed cenvat on a duty paying document the documents must be defaced so that it can not be used again. These duty paying document already defaced and the record along with his own delivery documents must be shown to the Central Excise officers on demand. There is a provision for removing raw materials, inputs or capital goods on which cenvat credit has been taken out of the factory for further processing, repairs or job work. Details of the cenvat scheme may be obtained from the local Central Excise officer. Please note that when duty is being paid vide cenvat credit, the credit accruing on goods received after the last day of the month in which duty is due to be paid, can not be utilized. (CBEC's circular 542/38/2000-Cx. Dated 25.8.2000)