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

[Brijesh Verma]

~We would need some more info.

However, to the extent of information supplied, we would opine that reversal can be made under the provisions of Rule 6(3) of CCR

[Brijesh Verma]

Pls inform:

1. are you using common inputs/services

2. we presume, you should not have much difficulty in maintaining separate books 

3. What are the input services that are being commonly consumed

[SNEHAL SHAH]

Thanks a lot sir .

We are not using common input but Yes common services like canteen , telephone , & other manpower . So I think that we have to reverese the duty because seperate records not possible in this case .

If U are not agree plese guide to us .

With Regards,

SNEHAL SHAH

[phaniraju konidena]

i) Job work is exempted under Notification 214/86.

ii) In the case of Vishal Pipes Ltd., Vs. CCE, Noida reported in 2011 (263) ELT 81 (Tri.-Del) (2010 (9) TMI 415 - CESTAT, NEW DELHI) has held that Cenvat/Modvat - Job work - Assessee received materials from principal manufacturer under Notification 214/86-C.Eand used inputs like furnace oil, greece and Hcl in the job work and cleared such final products without payment of duty to persons who supplied the materials - Notification 214/86-C.E. not exempts the goods manufactured by job worker unconditionally but merely postpones time of payment of duty and shifts liability to principal - Goods cleared by appellants under Notification 214/86-C.E. cannot be treated as exempted goods, hence question of applying Rule 6 of Cenvat Credit Rules does not arise - Demand of duty by disallowing credit attributable to materials used by job worker not sustainable.

with regards,

K.PHANI RAJU

AI Summary

Cenvat credit reversal required where common input services support exempt and dutiable manufacture; separate records avoid reversal. A manufacturer conducting dutiable and exempted manufacture in the same premises must disallow or reverse cenvat credit attributable to exempted goods unless separate records allocate inputs and input services; absent such records, compliance requires either payment of a prescribed value or a proportionate reversal of credit using the specified formula. For job work covered by an exemption that defers duty to the principal, clearances by the job worker without duty may be treated as deferred liability of the principal rather than unconditional exemption, affecting the application of the cenvat reversal rule.