Ankit Bidasaria, CA & CS

Ankit BidasariaRule 4 of the CENVAT Credit Rules, 2004 (“CCR”) provides the conditions for availment of credit. Amendment rules inserted a new proviso after the second proviso in Rule 4(1). The new proviso shall be inserted with effect from first day of September, 2014. The proviso has been reproduced as under:

“Provided also that the manufacturer or the provider of output service shall not take CENVAT credit after six months of the date of issue of any of the documents specified in sub- rule (1) of rule 9.”

Thus, now there is a restriction introduced under the CCR that credit of the duty paid in inputs or input services should be availed with 6 months from the date of relevant document specified in Rule 9(1) of the CCR.

In Rule 4(7), as we know, there is a proviso clause that in case the payment of the value of input service and the service tax thereon is not made within 3 months from the date of the invoice (“or any relevant document as per Rule 9(1)”) the manufacturer of Service provider who has taken credit of such input service shall pay an amount equal to the Cenvat credit taken on such input service. Now, Rule 4(7) has been amended to make it clear that after the lapse of 6 months Credit cannot be claimed.

Now in a case where the payment to the service provider is not made within 3 months from the date of invoice, then the CENVAT credit so taken by the Service recipient has to be reversed. The credit of input tax amount can be taken by the service recipient once the payment has been made. There was no time limit on such re-credit. But now, since after the amendment no credit can be taken after six month from the date of invoice the re-credit cannot be taken. Further, there is no specific mention that the restriction clause of 6 months is only for the availment of first credit and the restriction does not covers re-credit availment.

Assume a case, where the assessee receives the service provider’s invoice on October 31, 20X4 which is dated October 01, 20X4. As per the amended Rule 4(1) the assessee can claim the input service tax till March 31, 20X5. Suppose he claims the credit on October 31st itself. Now, as per Rule 4(7) the assessee shall be required to make payment by December 31, 20X4. In case the assessee fails to make the payment to service provider, he shall be required to reverse the credit of input service tax so taken. Now, there can be two cases, the assessee might make the payment before the elapse of 6 months from the date of invoice (i.e. before March 31, 20X5) or he makes the payment after 6 months from the date of invoice (i.e. after March 31, 20X5).

CASE I: The assessee makes the payment before 6 months from the date of invoice (i.e. before March 31, 20X5)

In this case the assessee shall enjoy the benefit of availing the input tax credit as six months have not elapsed from the date of invoice.

CASE II: The assessee the payment after 6 months from the date of invoice (i.e. after March 31, 20X5)

In this case since as per Rule 4(1) the last date of availing the Input credit being March 31, 20X5 the assessee shall not be able to claim the input tax.

Therefore, we see that the benefit of 3 months time frame for payment of the value of the input service, vis-à-vis availment of CENVAT credit, would be subject to the overall limit of 6 months fixed for availment of credit by the new amendment.

Further, if any assessee fails to discharge the tax liability in the past and the assessee discharges the same after receiving a notice from the department he shall not be eligible to claim the input tax credit as the specified time limit of 6 months would have already lapsed.

Since the introduction of the CENVAT credit procedure over many years, there has never been prescribed a time limit for availing CENVAT Credit. This restriction is also unreasonable to the extent that authorities are entitled to adjudicate tax shortfalls and demands for the past five years in most cases.

(Author may be contacted at  bidasaria_a@yahoo.co.in)

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27 responses to “Time limit on Claiming CENVAT Credit: Major Implication”

  1. Ajit says:

    sir can anyone take cenvat credit from year 2009-10 to 2016-17 in the year 2016 and how as anyone can avail cenvat credit of only six month time period?

  2. Archi says:

    sir, we have paid the service tax of ap-june 2016 & have not claimed the input now if we take the input from the ap-Sept, then the amt will be higher than july-sept quarter service tax amt. so plz tell we can skip the payment in this quarter or not. (Propritorship firm)

  3. CA Anurag Vishwakarma says:

    Excise Duty Paid on input goods at the @ of 12.5% duty payable on output @ of 6 % how much CENVAT can be utilised in the case

  4. Rai Ravik says:

    can invoices older than 3 month under vehicle running on hire can be booked without any penalty?

  5. Rohan Melekar says:

    yes

  6. Sanjay Rane says:

    can i take service tax input credit for month of December 2015 for payment of Service Tax month of November 2015.

  7. Pranav kumar says:

    sir, we had make payment of service tax for the month of Oct & Nov without availing CENVAT credit on input service. can i take input tax credit of oct & nov month while making payment of current month(dec) service tax. plz suggest me. i m waiting of a valuable reply.

    thank u

  8. kailas dongre says:

    can i take service tax credit after 1 yerar from the date of invoice or date of registration is that service tax refund will get , in the condition of eou

  9. kailas dongre says:

    can i take service tax credit after 1 yerar from the date of invoice or date of registration , is that service tax refund will get , in the condition of eou

  10. Shambhavi says:

    we have other case here. plz help me out
    we are taking a CENVAT credit of last6 years(2008-14) and we are availing for current season i.c 2014-15 to 2015-16. so is this CENVAT notify applies to this. and one more we availed this credit even on output tax.. is it eligible or not . what best we can do to follow this CENVAT rule

  11. Sreeshti says:

    This particular article should be withdrawn considering the clarification issued by the CBEC Circular No.: 990/14/2014-CX-8 dated 19th november.

  12. CA Himanshu Chouhan says:

    Dear Ankit,

    How to go about in below case

    1. Date of invoice 1.4.14
    2. Date of completion of service 30.11.14
    3. Bill booked on 1.12.14
    4. Credit of service tax is not taken till date.
    5. Date of payment is 2.12.14.

    Whether in such case, the bar of availing cenvat for first time within 6 months applies.

    How to go about to protect loss of cenvat.

  13. BISWAJIT NAG says:

    1. whether input of service tax paid on specific service can be utilised as cenvat credit against payment of service tax for other service? Say, i have input on service tax paid against commission on sale. Can this available
    input can be utilised for payment of service tax on legal service?

    2. Please clarify case 1 and case 11 rule as stated in the article with suitable illustration.

  14. samir says:

    If credit has not been taken up to September 14 , how I get input credit for those bill which was dated 2013 even payment has made.Date of time limit for taking cenvat credit should be extended,please advice

    Regards

  15. prakash Dave says:

    Dear Sir,
    as per change in cenvat credit rules 1of rule 4 how many days count against 6 month for cenvat credit claim.
    Regards,

  16. Ankit Bidasaria says:

    Dear Rajan,

    As there is no clarification on the same, to be on a safe side it is not suggested to claim the cenvat of 2012 after September 01, 2014.

    Dear Aparna Srivastava,

    This amendment is on availment & not on utilisation.

    Dear Satya Prasad,

    Kindly mail the query with more details.

    Thank You.

  17. satya prasad sammeta says:

    Sir,

    A clarification required for the following transaction.

    Material despatched by the supplier to X address on Y Account and the delivery has been given to Z address.
    In the above case when x can avail the cenvat credit in their books?

  18. Aparna Srivastava says:

    Sir

    Is this amendment applicable for availment of Cenvat Credit or utilisation of Cenvat cerdit?

  19. Rajan kr sharma says:

    sir, if a company has not taken its input tax credit in year 2012. then said company can take input credit or not as per new amendment. as amendment is silent on this matter. As in previous CCR there was no time limit to avail input credit but a now time limit is imposed w.e.f 01/09/2014.

    Thanks Regards.

  20. Ankit Bidasaria says:

    There has been no change in the availment of Cenvat on Capital Goods, i.e. upto 50% credit can be taken at any point of time in a financial year and in any succeeding year or years.

  21. P Murthy says:

    Cenvat credit on capital goods previously we are eligible to utilize upto 50% in same FY and balance in any subsequent FY – IS there any ammendment regarding that

    If not any change what is the time limit for utilization cenvat credit on capital goods- How many years

  22. Ankit Bidasaria says:

    Dear Unnikrishnan V,

    Thank you for your inputs.

    I have mentioned that since the introduction of CENVAT credit there has not been a time limit. As the time limit was in the erstwhile MODVAT and not in CENVAT.

  23. Ankit Bidasaria says:

    Dear Honey,

    It is still not clear whether the amendment shall apply only for invoices issued after 01-Sep-2014 or even to the invoices raised earlier.

  24. Mansingrao Javir says:

    Thanks for detailed clearification.
    What is about availment of cenvat credit of capital goods..?

  25. VINOD KUMAR GUPTA says:

    A good clarification in regard of cenvat credit.
    vinod kumar gupta

  26. unnikrishnan v says:

    There appears a factual omission in the concluding remarks that there had never been a time limit prescribed.Under the MODVAT scheme effective from 1986 had the timelimt of SIX months to avail the credit.While a reasonable time limit may be desirable,the SIX months limit is too short..It can very well be ONE yyear or even 18 months(which is time limit for issue of SCN etc).It must be remebered that the timelimit for Capital goods continue to be TWo Financial years,50% in first and balance 50% in next FY.

  27. Honey says:

    Lets take an example: if Service provider raised invoices on dated 25-Jun-14 & service receipent not able to make the payment within 3 months & he is able to make the payment in 25-Jan-14 which means after 7 Months. Now pls confirm whether service receipent is able to take credit as payment made after six months but new amendment applicable from 01-Sep-14 which means 6 months not lapsed.

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