Diallownace of cenvat credit on trading activities

This query is : Resolved

vikas malpote (Querist)
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26 August 2011 i have already availed & utilised full cenvat credit during last five years i.e. from 2006 to 2011. We are performing trading as well as provision for service activities. During EA 2000 the auditor has disallowed input credit of ST in proportion of trading & provision for services activities for dis allowance of expense related to trading activity. Please suggest action is tenable by law.

Ajay Raghatate

Ajay Raghatate (Expert)
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27 August 2011 As per Rule 6, Cenvat Credit Rule 2004,
Assesee has to maintain separate books for Exempted & taxable service business, If assesee maintain consolidated Books, then assesee has to pay / Reverse proportionate cenvat credit amount, plz refer below notf no

Notification No. 3/2011-Central Excise (N.T.)

Pradeep Jain

Pradeep Jain (Expert)
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17 September 2011 Regarding query on reversal of cenvat credit on trading activity, Please note that it is added in the defintion of "exempted service" from this budget. But the CBEC has clarified in its circular that it has retrospective effect. Furthermore, there are certain tribunal decisions supporting the reversal of cenvat credit on trading activity.

Pradeep Jain

Pradeep Jain (Expert)
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17 September 2011 Regarding query on Rule 6, three options are availalbe. first to maintain separate inventory or to do proportionate reversal underRule 6(3A) or to do reversal @ 5% on value of exempted goods or services.

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