Cenvat credit for services under negative list

For negative services Rule 6 reversal shall not apply...as I think..

Cenvat Credit can not be availe if final product or service is exempted or actracts nil rate of duty

Please refer to the below definition of Exempted service, as per Rule 2(e) of the CENVAT Credit rules, 2004:

"exempted service" means a—

1. taxable service which is exempt from the whole of the service tax leviable thereon; or

2. service, on which no service tax is leviable under section 66B of the Finance Act; or

3. taxable service whose part of value is exempted on the condition that no credit of inputs and input services, used for providing such taxable service, shall be taken

but shall not include a service which is exported in terms of rule 6A of the Service Tax Rules, 1994.

As per Sec. 66B of the FInance Act, There shall be levied a tax (hereinafter referred to as the service tax) at the rate of fourteen per cent on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed.

Hence, as per the definition, Exempted service includes services specified in the Negative List.

Therefore, in my view, Negative list services should be considered as exempted service for the purpose of Rule 6 of CENVAT Credit rules.

Dear Jay,

This is matter of interpretation, as -

• the plain reading of the definition of ‘exempted service’ under Rule 2(e) of the Cenvat Credit Rules, 2004 (‘CCR’) suggests that each service mentioned in the negative list should be considered as an exempt service;
• However,
  • How can one say that manufacturing activity is an exempt service, when it is not a service only;
  • Secondly, there is no valuation mechanism prescribed under Explanation to Rule 6(3D) of the CCR.

Thus, it would be better if you provide your query with specific details.