Cenvat credit availment and 6(3) reversal

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shiv (Querist)
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19 December 2011 One company has taken (availed) Cenvat credit on input services documents of 2005,2006 in the year 2011 as they had not taken it earlier. But the company has not proportionately reversed the cenvat credit under Rule 6(3) of Cenvat credit Rules for output taxable services and exempted out put services in 2011 stating that the input service documents were of 2005 and 2006 and at that time there was no such kind of reversal of Cenvat credit . Is their stand correct?

Maninder Jain

Maninder Jain (Expert)
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20 December 2011 Lets devide your query in two parts:

(1) Is late availment of cenvat credit justified.

(2) Reversal u/r 6(3) depends on the month of sales of availment credit or month to which credit belongs.

For Q no. 1, cenvat cannot be denied on the ground that it was not availed immediately. Pls see decided case law:

2011-TIOL-1644-CESTAT-AHM
CCE, Ahmedabad Vs M/s Pierlita India Pvt Ltd (Dated: July 28, 2011)
Service Tax – Availment of CENVAT credit of service tax paid on input services for the period from December 2006 to February 2008 in March 2008 – Credit cannot be denied on the ground that it was not availed immediately – No merit in Revenue appeals - Revenue appeal rejected : AHMEDABAD CESTAT

For Q no. 2: The answer is based purely on my opinion.
Normally for convenince also we decide about how much to reverse u/r 6(3) on the basis of a particular month total cenvat availed and ratio of extempted sales to total sales of that particular month only. It will be very difficult to segregate to which month a particular credit belongs. However in your case it is different story. You may not reverse any credit because you did not have exempted sales in that month. If any SCN is received, reply accordingly

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shiv

shiv (Querist)
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20 December 2011 clarification on Q 2. If the company has 80% revenue which is exempted as far as service tax and excise is concerned and only 20% taxable revenue in 2011, then should the company go for 6(3) A reversal of Cenvat credit availed in 2011 on input services cenvatable invoices of the years 2005,2006 and 2007?

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