Dear Professional Colleagues and Clients
Hope the information helps you in indirect tax compliance.
Good news!!!!!
CBEC
has relaxed the the time limit of six months of cenvat credit availment
in case of re-credit. Through the Circular No: 990/14/2014-CX-8 dated. November 19,
2014, it has been clarified that the purpose of the amendment made by
Notification No. 21 is to ensure that after the issuance of a document
under Rule 9(1) of the Credit Rules, Cenvat credit is taken for the
first time within six months of the issue of the document. Once this
condition is met, the limitation has no further application.
This
circular is clarificatory in nature. In Finance Act, 2014, through
notification 21/2014-ST government has amended Rule 4(1) and Rule 4(7)
of the Cenvat Credit Rules, 2004 to fix a time limit of six months from
the date of issuance of any of the documents specified in Rule 9(1)
thereof, for availment of the Cenvat Credit on Inputs and Input
Services.
Rule
4(7) of Cenvat Credit Rules allows the admissibility of cenvat credit
if payment to vendor is to be made within 3 months of invoice otherwise
cenvat credit is to be reversed and it can be taken back again when
final payment to vendor is made. In the case where the payment is not
done in three months, cenvat credit taken is require to be reverse and
it can be taken again when the payment is made to vendor.
Problem
arises when payment is done after six months from the date of invoice.
There is big loss to assessee because of the reason for non-payment in
six months.
Let us understand from an example. : -
Assesee received Invoice dated 01st January, 2014 on 05th January, 2014.
As per the Notification 21/2014 cenvat credit can be taken on or before 30th June, 2014 (Six months from 01st January, 2014)
Cenvat Credit taken on 05th January, 2014.
Payment not done till 31st March, 2014.
Credit to be reversed on 01st April, 2014 since payment is not made within 3 months.
As per the Notification 21/2014 cenvat credit can be taken on or before 30th June, 2014 (Six months from 01st January, 2014)
Cenvat Credit taken on 05th January, 2014.
Payment not done till 31st March, 2014.
Credit to be reversed on 01st April, 2014 since payment is not made within 3 months.
Effect of Notification 21/2014 - ST
If payment is made before 30th June, 2014. Cenvat Credit can be taken again without any hindrances.
If payment is made after 30th June, 2014. Cenvat Credit cannot be taken again since there is time-limit of six months from the date of invoice. And in the case time-limit of six months is expire.
There is same problem in below cases : -
If payment is made before 30th June, 2014. Cenvat Credit can be taken again without any hindrances.
If payment is made after 30th June, 2014. Cenvat Credit cannot be taken again since there is time-limit of six months from the date of invoice. And in the case time-limit of six months is expire.
There is same problem in below cases : -
Job work where input sent for job work is not received back within 180 days
Input or capital goods written off are subsequently used.
Input or capital goods written off are subsequently used.
Industry
shows its concern regarding the admissibility of re-credit of the
credit reversed earlier if payment is done after six months.
Resultantly government has come out with solution and issued Circular No: 990/14/2014-CX-8 dated. November 19,
2014 (“the Circular”) which clarified that the purpose of the amendment
made by Notification No. 21 is to ensure that after the issuance of a
document under Rule 9(1) of the Credit Rules, Cenvat credit is taken for
the first time within six months of the issue of the document. Once
this condition is met, the limitation has no further application. The
relevant text of the Circular is reproduced here in below:
“2.
Concerns have been expressed by trade that in view of above changes,
the re-credit taken in following three situations may be hit by the time
limit of six months prescribed:
i. 3rd proviso to Rule 4(7) of CCR, 2004 prescribes that if the payment of value of input service and service tax payable is not made within three months of date of invoice, bill or challan, then the CENVAT Credit availed is required to be paid back by the manufacturer or service provider. Subsequently, when such payment of value of input service and service tax is made, the amount so paid back can be re-credited.
ii. According to Rule 3(5B) of CCR, 2004, if the value of any input or capital goods before being put to use on which CENVAT Credit has been taken, is written off or such provisions made in Books of Account, the manufacturer or service provider is required to pay an amount equal to credit so taken. However, when the inputs or capital goods are subsequently used, the amount so paid can be re-credited in the account.
iii. Rule 4(5)(a) of CCR, 2004 prescribes that in case inputs sent to job worker are not received back within 180 days, the manufacturer or service provider is required to pay an amount equal to credit taken on such inputs in the first instance. However, when the inputs are subsequently received back from job worker, the amount so paid can be re-credited in the account.
3. The matter has been examined. The purpose of the amendment made by Notification No. 21/2014-CE (NT) dated 11.07.2014 is to ensure that after the issue of a document under sub-rule (1) of Rule 9, credit is taken for the first time within six months of the issue of the document. Once this condition is met, the limitation has no further application. It is, therefore, clarified that in each of the three situations described above pertaining to Rule 4(7), Rule 3(5B) or Rule 4(5) (a) of CCR, 2004, the limitation of six months would apply when the credit is taken for the first time on an eligible document. It would not apply for taking re-credit of amount reversed, after meeting the conditions prescribed in these rules.”
i. 3rd proviso to Rule 4(7) of CCR, 2004 prescribes that if the payment of value of input service and service tax payable is not made within three months of date of invoice, bill or challan, then the CENVAT Credit availed is required to be paid back by the manufacturer or service provider. Subsequently, when such payment of value of input service and service tax is made, the amount so paid back can be re-credited.
ii. According to Rule 3(5B) of CCR, 2004, if the value of any input or capital goods before being put to use on which CENVAT Credit has been taken, is written off or such provisions made in Books of Account, the manufacturer or service provider is required to pay an amount equal to credit so taken. However, when the inputs or capital goods are subsequently used, the amount so paid can be re-credited in the account.
iii. Rule 4(5)(a) of CCR, 2004 prescribes that in case inputs sent to job worker are not received back within 180 days, the manufacturer or service provider is required to pay an amount equal to credit taken on such inputs in the first instance. However, when the inputs are subsequently received back from job worker, the amount so paid can be re-credited in the account.
3. The matter has been examined. The purpose of the amendment made by Notification No. 21/2014-CE (NT) dated 11.07.2014 is to ensure that after the issue of a document under sub-rule (1) of Rule 9, credit is taken for the first time within six months of the issue of the document. Once this condition is met, the limitation has no further application. It is, therefore, clarified that in each of the three situations described above pertaining to Rule 4(7), Rule 3(5B) or Rule 4(5) (a) of CCR, 2004, the limitation of six months would apply when the credit is taken for the first time on an eligible document. It would not apply for taking re-credit of amount reversed, after meeting the conditions prescribed in these rules.”
