Reversal of cenvat credit availed

This query is : Resolved

CA Deepika Gandhi (Querist)
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01 December 2012 Dear All,
Co A providing means of transportation to a GTA which is exempted from service tax under mega exemption notification. Earlier the same service was exempt under supply of tangible goods for use to a GTA. Now, Co A has availed cenvat of excise paid on vehicles provided to the GTA. And as per rule 6(4), no credit shall be allowed on capital goods used exclusively in providing exempted services. But Co A is into a temporary arrangement with that GTA, in long run the vehicles will be used for providing taxable services.

In such a situation, still Co A needs to reverse the credit availed on such capital goods? If yes, then whether in future, the amount paid now under reversal can be availed as credit when the vehicles will be used for providing taxable services ?

I think law cannot be so ruthless that for a month or two, it will deny credit for lifetime. Kindly help me to understand the language of the law.

CA Sahil Singla..

CA Sahil Singla.. (Expert)
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02 December 2012 Mam

According to me CenVat credit should be reversed at First Instance.However, i agree that Cenvat credit cen be taken when such vehicles are used for providing taxable service. Under law, there is no time limitation for availing cenvat credit.

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