1. Rule 4(1) of Cenvat Credit Rules’ 2004 amended with major impact (applicable e.f. 1st Sept’ 2014)

This rule specifies condition for taking cenvat credit on Inputs. New proviso has been added in this rule which states as follows –

Provided also that the manufacturer or the provider of output service shall not take Cenvat credit after 6 months of the date of issue of any of the documents specified in rule 9(1).”;

Pre amendment, time limit for taking cenvat credit was not prescribed. Assessee used to take the belated cenvat credit also. Now, the condition of 6 months has been prescribed for Input as well as Input Services.

2. Rule 4(7) Cenvat Credit Rules’ 2004 amended with major impact (applicable e.f. 11th July’ 2014 and 1st Sept’ 2014)

This rule specifies condition for taking cenvat credit on Input Services. New proviso has been substituted for the first and second proviso which states as follows –

  • Provided that in respect of Input Service where whole of the service tax is liable to be paid by the recipient of service, credit shall be allowed after the service tax is paid: (Applicable e.f. 11th July’ 2014)

Earlier the value of input service was also required to be paid to the service provider. Now, this condition has been dispensed with. Hence, pay tax under 100% reverse charge and take cenvat credit.

  • Provided further that in respect of an Input Service, where the service recipient is liable to pay a part of service tax and the service provider is liable to pay the remaining part,

→The Cenvat credit in respect of such input service shall be allowed on or after the day on which payment is made of the value of input service and the service tax paid or payable as indicated in invoice, bill or, as the case may be, challan referred to in rule 9:

With this amendment, provisions for partial reverse charge have also been considered now. Cenvat credit can be availed after paying value of input service as well as service tax. (Applicable w.e.f. 11th July’ 2014)

  • Provided also that the manufacturer or the provider of output service shall not take Cenvat credit after 6 months of the date of issue of any of the documents specified in rule 9(1)”.

(Applicable w.e.f. 1st Sept’ 2014)

Pre amendment, time limit for taking cenvat credit was not prescribed. Assessee used to take the belated cenvat credit also. Now, the condition of 6 months has been prescribed for Input as well as Input Services.

GIST (FOR SERVICE PROVIDER AS WELL AS MANUFACTURER)

Cenvat Credit on Input [Rule 4(1) of Cenvat Credit Rules’ 2004]Cenvat Credit can be availed only within 6 months from the date of receipt of invoice, etc.

Cenvat Credit on Capital Goods [Rule 4(2) of Cenvat Credit Rules’ 2004]

Cenvat Credit can be taken at any time after the receipt of capital goods in premises.

(6 month period is not applicable)

Cenvat Credit on Input Service [Rule 4(7) of Cenvat Credit Rules’ 2004]

In case of 100% Reverse Charge

Cenvat credit to be availed after payment of service tax. (6 Month period is applicable from date of payment of service tax)

In case of Partial Reverse Charge

  • Credit on portion of SP

Cenvat Credit is available after payment of Value and Tax to the service recipient (6 Month period is applicable from date of invoice).

  • Credit on portion of SR

Rule silent. As per my interpretation, Cenvat credit to be availed after payment of value to the service recipient and service tax to the government. (6 Month period is applicable from date of invoice)

 In case of Other Input Services

Cenvat credit to be available on the day the invoice is received. (6 Month period is applicable from date of invoice).

If payment of Service Tax and Value is not made to the service recipient within 3 months, then pay Cenvat Credit and then re-avail after its payment (6 Month period is applicable).

Now the moot question is that whether the provision for taking cenvat credit within 6 months is applicable on invoices issued w.e.f. 1st Sept’ 2014 only or it is also applicable on invoices issued prior to this date?

In this respect it is mentioned that in the recent judgment passed by Mumbai Tribunal in case of Ashok Leyland Ltd vs. Commissioner of Central Excise, Nagpur (2014 TIOL 2102 CESTAT MUM) it was held that as per Rule 57G of CER, 1944 time limit of six months would be applicable even for the consignment which had arrived before the introduction of the procedural restriction.

Rule 57G of CER, 1944 was same as Rule 4(1) and Rule 4(7) of cenvat credit rules’2004. Rule 57G of CER’ 1944 specifically provided that “no credit under sub-rule (3) shall be taken by the manufacturer unless the inputs are received in the factory under the cover of specified documents.” Further, sub-rule (5) specifically provided that “credit shall not be taken by the manufacturer after six months of the date of issue of any document specified in sub-rule (3).”

The Bench adverted to the decision in Osram Surya (P) Ltd. vs. CCE, Indore – 2002-TIOL-64-SC-CX where the Apex Court observed that the substantive right had not been taken away by the introduction of the proviso to the Rule but a procedural restriction was introduced and which was permissible in law. Inasmuch as the time limit of six months would be applicable even for the consignment which had arrived before the introduction of the said proviso.

Thus, applying the ratio of this judgment, time limit of 6 months might be applied to invoices issued prior to 1 September, 2014.

(Author -CA Raman Singla, Partner- Indirect Tax Professionals, www.indirecttaxprofessionals.com ,Mail: caramansingla@gmail.com)

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