CBEC clarification
regarding availment of Cenvat credit on Inputs/ Input Services after six months
Background: The CBEC
vide Notification No. 21/2014-CE (NT), dated July 11,
2014 (Applicable w.e.f September 1, 2014) [Notification
No. 21], has amended Rule 4(1) and Rule 4(7) of the Cenvat Credit
Rules, 2004 (the Credit Rules) to fix a time limit of six months from
the date of issuance of any of the documents specified in Rule 9(1) thereof,
for availment of the Cenvat Credit on Inputs and Input Services.
Clarification by the
CBEC: The CBEC vide Circular No: 990/14/2014-CX-8 dated. November 19, 2014 (“the Circular”) has clarified
that the purpose of the amendment made by Notification No.
21 is to ensure that after the issuance of a document under Rule 9(1) of the
Credit Rules, Cenvat credit is taken for the first time within six
months of the issue of the document. Once this condition is met,
the limitation has no further application. The relevant text of the
Circular is reproduced here in below:
“2. Concerns have been
expressed by trade that in view of above changes, the re-credit taken in
following three situations may be hit by the time limit of
six months prescribed:
i. 3rd proviso to Rule
4(7) of CCR, 2004 prescribes that if the payment of value of input service and
service tax payable is not made within three months of date of invoice, bill or
challan, then the CENVAT Credit availed is required to be paid back by the
manufacturer or service provider. Subsequently, when such payment of value of
input service and service tax is made, the amount so paid back can be
re-credited.
ii. According to Rule
3(5B) of CCR, 2004, if the value of any input or capital goods before being put
to use on which CENVAT Credit has been taken, is written off or such provisions
made in Books of Account, the manufacturer or service provider is required to
pay an amount equal to credit so taken. However, when the inputs or capital
goods are subsequently used, the amount so paid can be re-credited in the
account.
iii. Rule 4(5)(a) of
CCR, 2004 prescribes that in case inputs sent to job worker are not received
back within 180 days, the manufacturer or service provider is required to pay
an amount equal to credit taken on such inputs in the first instance. However,
when the inputs are subsequently received back from job worker, the amount so
paid can be re-credited in the account.
3. The matter has been
examined. The purpose of the amendment made by Notification No. 21/2014-CE
(NT) dated 11.07.2014 is to ensure that after the issue of a document
under sub-rule (1) of Rule 9, credit is taken for the first time within six
months of the issue of the document. Once this condition is met, the limitation
has no further application. It is, therefore, clarified that in each of the
three situations described above pertaining to Rule 4(7), Rule 3(5B) or Rule
4(5) (a) of CCR, 2004, the limitation of six months would apply when the credit
is taken for the first time on an eligible document. It would not apply
for taking re-credit of amount reversed, after meeting the conditions prescribed
in these rules.”
Other Open issues –
Not clarified:
Even though the CBEC has clarified
non-applicability of six months time limit while availing re-credit in terms of
the Credit Rules but, there are certain other issues still exists in this
regard, which requires immediate attention of the Board:
(i) SSI Unit crossing Exemption limit: In
terms of Rule 3(2) of the Credit Rules, a manufacturer or producer of final
products is allowed to take Cenvat credit of the duty paid on inputs lying in
stock or in process or inputs contained in the final products lying in stock,
on the date on which any goods manufactured by the said manufacturer or
producer cease to be exempted goods or any goods become excisable.
Issue:
Where a manufacturer availing SSI exemption, crosses the exemption limit,
whether transitional credit is available if the invoices under which the above
category of inputs were purchased are beyond six months from the date of taking
Cenvat credit?
(ii) Cenvat credit on goods received after
re-conditioning, repairs, etc.: Under Rule 16 of the Central Excise Rules,
2002, where any goods on which duty had been paid at the time of removal are
brought to any factory for being re-made, refined, re-conditioned or for any
other reason, the assessee shall state the particulars of such receipt in his
records and shall be entitled to take Cenvat credit of the duty paid as if the
goods are received as inputs under the Credit Rules and utilize the Cenvat
credit according to the Credit Rules.
Issue:
Whether the newly added proviso to Rule 4(1) of the Credit Rules, which talks
about inputs, would apply to Cenvat credit taken on finished goods
received by the manufacturer in the factory beyond 6 moths of its removal from
the factory?
(iii) Invoices issued prior to September 1,
2014: Notification No. 21 amending Rule 4(1) and Rule 4(7) of the Credit Rules
is effective from September 1, 2014.
Issue:
Whether the time limit of six months prescribed for availing Cenvat credit
would apply to the invoices issued prior to September 1, 2014?
We request esteemed readers to write back to
us for any other related issue(s) pertaining to time limit of 6 months for
availing Cenvat credit on Inputs and Input Services in the light of
Notification No. 21 read with the Circular issued by the CBEC.
(Bimal Jain,
FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com) Read Other Articles from CA Bimal Jain
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