Clarification on applicability of rule 6(3) of ccr

This query is : Resolved

Manoj BG (Querist)
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27 October 2012 Hi friends,

I want clarification on applicability of Rule 6(3) of Cenvat Credit rules, 2004. As per notification no. 03/2011 dated 01.03.2011, trading of goods become part of exempted services and difference between sale price minus purchase cost or 10% of cost of goods sold is deemed to be value of exempted services on account of trading of goods. As such, we started process for reversing proportional credit taken on these exempted services w.e.f.01.04.2011 till date by exercising option under rule 6(3)(ii) . Now, department is contending that whether you have reversed credit on for the period prior to 01.04.2011 i.e. frm 01.04.2008

Now, my question is follows :
1. Whether we need to reverse the credit proportionately before the period when trading been part of exempted services.if no, what contention we should keep in support of our allegation

2. if yes, how should value of exempted services determine. That means before 01.04.2011, valuation methodology for trading activities has not been prescribed. on 01.04.2011, trading activity is integrated as part of exempted service and valuation as specified above

Experts suggestion highly solicited.

Thanks and regards,

manoj

Arun Kumar Singh

Arun Kumar Singh (Expert)
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28 October 2012 Input services used in relation to trading activity, you should reverse that cenvat credit. You can claim the cenvat credit on input or input services in relation to manufacturing activity. If you will not reverse the proportionate way then department can demand the reversal of cenvat credit with interest and penalty.

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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28 October 2012 Yes I agree with the expert Mr. Arun and you should revise as soon as it is possible. In future you may face problems of court cases, recovery proceedings etc. etc. as has been mentioned by the expert

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