OFFICE OF THE COMMISSIONER OF CENTRAL EXCISE::  MADURAI-625 002. 

Trade Notice No.  14/2009       Dated:   13.03.2009.      Service Tax No.     6/2009

Sub:- Service Tax – Utilisation of accumulated CENVAT credit restricted in terms of erstwhile Rule 6(3)( c) of CENVAT Credit Rules, 2004 – Regarding.

 The issue of restriction of utilisation of accumulated CENVAT credit in terms of erstwhile Rule 6 (3) (c) of CENVAT Credit Rules, 2004 has been examined.  The following points emerged during its consideration: 

Ø       Prior to 01.04.2008 [before the amendment in Rule 6(3)] the option available to the taxpayer, under Rule 6(3), was that, he was allowed to utilize credit only to the extent of an amount not exceeding 20% of the amount of service tax payable on taxable output service.  However, there was no restriction in taking CENVAT credit and also there was no provision about the periodic lapse of balance credit.  This resulted in accumulation of credit in many cases.

Ø       W.e.f. 01.04.2008, under the amended Rule 6(3), the following options are available to the taxpayers not maintaining separate accounts; 

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     (i)       Option No.1 – In respect of exempted goods, he may pay an amount equal to 10% of the value of exempted goods; and in respect of exempted / non taxable services, he may pay an amount equal to 8% of the value of such exempted / non-taxable service.  OR 

     (ii)      Option No.2 – He may pay an amount equivalent to CENVAT Credit attributable to inputs and input services attributable to exempted goods and non-taxable / exempted services. 

Ø       As stated earlier, many taxpayers had accumulated CENVAT credit balance as on 01.04.2008.  The matter to be considered was whether this credit balance should be allowed to be utilised for payment of service tax after 01.04.2008.

Ø       As no lapsing provision was incorporated and that the existing Rule 6(3) of the CENVAT Credit Rules does not explicitly bar the utilization of the accumulated credit, the department should not deny the utilization of such accumulated CENVAT credit by the taxpayer after 01.04.2008.  Further, it must be kept in mind that taking of credit and its utilization is a substantive right of a taxpayer under value added taxation scheme.  Therefore, in the absence of a clear legal prohibition, this right cannot be denied. 

2.       This may be brought to the notice of all constituent members of your trade associations.        

( Authority: Board’s letter F.No.137/72/2008-CX.4 dated 21.11.2008 ) 

( Issued from File C.No:IV/16/06/2009-STU )

  (A.S.MEENALOCHANI)

DEPUTY COMMISSIONER

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