Provisions in the Cenvat Credit Rules, 2004 regarding reversal of credit

Jul 09, 2019 | by Avantis RegTech Legal Research Team


The Central Board of Indirect taxes and Customs (CBIC) on July 05, 2019, has clarified the issues regarding reversal of credit provisions in the Cenvat Credit Rules, 2004.

Issue 1: Is reversal under Rule 6(3) of the Cenvat Credit Rules, 2004, which specifies the Obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services, additionally required for all the services specified in the Notification No. 26/2012-Service tax dated June 20, 2012?

Answer: On a plain and strict interpretation of the provisions, all services mentioned in Notification No. 26/2012-Service Tax dated June 20, 2012 do not, ipso facto, become ‘exempted services’. They will become so only if they satisfy the twin conditions specified in section 2(e):exempted services of the Cenvat Credit Rules, 2004 that is there is a restriction on both inputs and input services.

Issue 2: Is reversal under Rule 6(3) of the Cenvat Credit Rules, 2004 additionally required, when providing the “service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) are supplied in any manner as part of the activity”. (That is Section 66E (i) of the Finance Act, 1994)?

Answer: On a plain and strict interpretation of the wording of the relevant provisions, other than the restrictions in Rule 2C of the Service Tax (Determination of Value) Rules, 2006, there is no need for any further reversal of credit under rule 6(3) of the Cenvat Credit Rules, 2004.

[Circular 213/3/2019-Service tax]    


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