CENVAT Credit - Major Amendment

Rule 6 of the CENVAT Credit Rules, 2004 deals with reversal of CENVAT Credit attributable to Exempted Goods/Services wherein one of the option [Rule 6(3)(i)] seeks payment of an amount equal to 6% of value of the exempted goods and the provider of output service shall pay an amount equal to 7% of value of the exempted services.

It was a common procedure followed by the Department Authorities at the time of audit [in absence on any declaration being filed as per Rule 6(3A)(a) of the CENVAT Credit Rules, 2004] to demand  6% of value of the exempted goods or 7 % of value of the exempted services under the garb of the aforesaid provision at time which exceeds the total CENVAT Credit taken by a huge margin and sums up to be an astronomical figure. This would lead into litigations which are still pending at various appellate levels.

Vide Notification No. 23/2016 dated 01-04-2016, Rule 6(3)(i) of the CENVAT Credit Rules, 2004 has been amended to limit the aforesaid reversal of CENVAT Credit to a maximum of the sum total of opening balance of the credit of input and input services available at the beginning of the period to which the payment relates and the credit of input and input services taken during that period.

 

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