Rule 7 of Cenvat Credit Rules, 2004 which entails distribution of CENVAT credit by Input Service Distributor has been  amended vide Notification No. 05/2014 – Central Excise (N.T.) dated 24th February 2014 as under:
a. For the units that are exclusively engaged in manufacture of exempted goods or providing of exempted services, service tax paid on input services used by one or more units will not be allowed to be distributed as Cenvat Credit.
b. Credit of service tax paid on input services will be distributed only to the unit by which the service is wholly used c. Pro Rata distribution of service tax credit shall be based on turnover of units using said input service during relevant period to total turnover of all its units operational in current year, during said relevant period.
d. Relevant Period:
(i) If the assessee has turnover in the year preceding to the month/ quarter during  hich credit is to be distributed: Relevant period will be the preceding financial year if Input Service Distributors turnover is available for that year
(ii) If details of turnover are not available for some or all of the units: Relevant period will be the last quarter, previous to the month/ quarter for which credit is istributed, for which turnover details of all units is available will be the relevant
period.
This amendment will be effective from 1st April 2014

Notification No. 05/2014 – Central Excise (N.T.), Dated-  24th February, 2014

G.S.R….(E).­­- In exercise of the powers conferred by section 37 of the Central Excise Act,1944 (1 of 1944) and section 94 of the Finance Act,1994 (32 of 1994),  the Central Government hereby makes the following rules further to amend the CENVAT Credit Rules,2004, namely:-

1.   (1) These rules may be called the CENVAT Credit (Third Amendment) Rules, 2014.

(2) They shall come into force on the 1st day of April, 2014.

2.   In rule 7 of the CENVAT Credit Rules, 2004, ­-

(i)   in clause (b) for the words, “used in a unit”, the words “used by one or more units” shall be substituted;

(ii)  in clause (c) for the words, “used wholly in a unit”, the words “used wholly by a unit” shall be substituted;

(iii) for clause (d), the following clause shall be substituted, namely:-

“(d) credit of service tax attributable to service used by more than one unit shall be distributed pro rata on the basis of the turnover of such units during the relevant period to the total turnover of all its units, which are operational in the current year, during the said relevant period.”;

(iv) for Explanation 3, the following shall be substituted, namely:-

Explanation 3.- For the purposes of this rule, the ‘relevant period’ shall be,-

(a) If the assessee has turnover in the ‘financial year’ preceding to the year during which credit is to be distributed for month or quarter, as the case may be, the said financial year; or

(b) If the assessee does not have turnover for some or all the units in the preceding financial year, the last quarter for which details of turnover of all the units are available, previous to the month or quarter for which credit is to be distributed.”.

[F.No. 354 /246/ 2013-TRU]

(Akshay Joshi)

Under Secretary to the Government of India

Note.- The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), dated the 10th September,2004, vide  notification No.23/2004 – Central Excise (N.T.) dated the 10th September, 2004 vide number G.S.R. 600(E) dated the 10th September,2004 and last amended vide notification No. 02/2014 – Central Excise (N.T.) dated the 20th Januray,2014 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 36(E), dated the 20th January,2014.

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