CENVAT CREDIT RULES, 2004

Rule 6(3)

Cenvat credit - Reversal of CENVAT Credit - Common input services used by the appellant for providing both taxable output services and exempted services -

Assessee was rendering taxable services under the category of "management, maintenance or repair" services and "information technology software" services. It claimed to have availed and utilised the CENVAT credit earned on input services for discharging its output tax liability in terms of provisions of "CENVAT Credit Rules, 2004". Assessee claimed that CENVAT Credit was availed of by assessee after following the procedure of proportionate reversal of CENVAT credit amount attributable to exempted service under rule 6(3A). Department noticed that assessee, while reversing proportionate credit under rule 6(3A) (b) (ii) and rule 6(3A) (c)(iii) had only considered amount of CENVAT credit attributable to common input services used both in taxable as well as exempted services including the common input services, for the purpose of such reversal. Accordingly, a Show Cause Notice was issued to assessee proposing to recover short paid amount determined under rule 6(3A). Held: It would be clear from a conjoint reading of sub-rule 6(1), (2) and (3) of rule 6 that the total CENVAT credit for purpose of formula under rule 6(3A) was only total CENVAT credit of common input service and cannot include CENVAT credit on input service exclusively used for the manufacture of dutiable goods. This position was also clear from the underlying object of the amendment made in rule 6(3A) of the Rules by Notification, dated 1-3-2016, to consider only common input services and not total input service credit, for the purpose of computing the amount of reversal. Provisions of rule 6 providing for reversal of credit in respect of input services used in exempted services, is being redrafted with the objective to simplify and rationalize the same without altering the established principles of reversal of such credit. The confirmation of demand, therefore, cannot be sustained.

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

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