Job work & Manufacturing Activity in same premises Rule 6 CCR 2004

[SNEHAL SHAH]

R/sir,

Service tax Liability under CCR, 2004:: (Manufacturing of Exempted as well as Excisable Product):

We are the Manufacturing of   packaging materials.

We are also engage in Job work of same product of manufacturing of our other unit A - Mumbai & duty liability release from Unit-A on final product .
There is not a issue in Central Excise because end user / Original Manufacturer (Unit-A) release Central excise duty , Only question raise on Service Tax part as per below CCR, 2004.

(Job work is exempted under Notification 214/86 dt.25.03.1986)

Rule 6 of Cenvat Credit Rule, 2004:-  

Rule 6 of CCR. deals with the Cenvat Credit provisions in case of manufacturer of both dutiable and exempted goods (hereinafter referred as said manufacturer). Sub rule 1 to this rule says that credit is not allowed on that much portion of the inputs/input services that are used for manufacture of exempted goods. Sub rule 2 prescribes that credit will be allowed on common inputs/input services if the said manufacturer maintains separate records for inputs/input services used in manufacture of both dutiable and exempted goods. Sub rule 3 states that if the said manufacturer is unable to maintain separate records, he has to either pay 10 percent of the value of exempted goods at the time of clearance of such goods or he will have to proportionately reverse the credit attributable to the exempted goods. Clause of proportionate reversal has been inserted w.e.f. 1.4.2008 prior to which there was only one option with the said manufacturer – to pay a value at the rate of 10 percent of the value of exempted goods. The proportionate reversal referred in sub rule 3 is to be done as per formula given in sub rule 3A of these rules. Similar provisions are there for the provider of taxable and exempted services.

As per above rules Can we pay/reverse proportionate Cenvat Credit on Service tax?

Please Guide in this issue .

With Regards,

SNEHAL SHAH

AI Summary

Service Tax Query on Cenvat Credit Rules: Managing Credit for Exempt and Excisable Goods Under Rule 6(3) Explained A manufacturing entity engaged in producing packaging materials and job work for another unit raised a query regarding service tax liability under the Cenvat Credit Rules (CCR), 2004, specifically Rule 6. The concern was about managing Cenvat credit for manufacturing both exempted and excisable goods, given the use of common services. Responses suggested that reversal of credit might be necessary under Rule 6(3) if separate records for inputs/services are not maintained. A reference was made to a case where goods cleared under job work were not considered exempted, affecting the applicability of Rule 6.