As per Rule 6 of the Cenvat Credit Rules, the Manufacturer shall not be allowed to avail Cenvat Credit attributable to the Inputs or Input services used in the manufacture of ‘EXEMPTED GOODS’.
Manufacturer shall maintain separate accounts for receipt, consumption and inventory of input meant for use in the manufacture of dutiable final products and separately for use in the manufacture of exempted goods and can avail CENVAT credit only on that quantity of inputs which is intended for use in the manufacture of dutiable goods.
In other words, the CENVAT credit to be reversed, on the portion of ‘Exempted goods’.
To reverse the CENVAT Credit,
Go to Gateway of Tally > Accounting Vouchers > Journal Voucher
Note: A separate Voucher Class should have been created before passing the Reversal entries.
Select the required Excise Unit from the list of Excise Units
Debit the ledger created for CENVAT Reversal on Exempt Goods (ideally grouped under Indirect Expenses) and specify the amount to be reversed.
Credit CENVAT Ledgers and select the bill references for reversing the credit.
Similarly, select the Education Cess and Secondary Education Cess Ledgers also for reversal.
This Reversal entry will affect the following Excise Reports: