Cenvat credit of 4% ADI on Inputs/Capital goods recd u/r3(5) of CCR,2004

[RAMNIRANJAN KANDOI]

An assessee (A) has recd Inputs/ Capital goods from its another unit B. Unit B has debited duty -Basic duty as well as 4% ADI.A has taken credit of both.

EA-2000, auditor has taken objection about credit taken of 4% ADI. According to him ,B is liable to debit but A cannot take. For this I do not agree the objection as Rule 3(6) of CCR,2004 allows the credit.

I will appreciate opinion of our experts as amount of credit is high.If any case law on this than may be quoted., so the same can be shown to auditor.

[Rajagopalan Ranganathan]

Sir,

According to proviso 4 of rule 3 (4) of Cenvat Credit Rules, 2004, no credit of the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act,shall be utilised for payment of service tax on any output service.

If A and B are both manufacturers then the audit objection is baseless. If B is a service provider and A is a manufacturer, then transfer of credit of additional duty leviable under sub-section (5) of section 3 of Customs Tariff Act by B to A is in order. According to the above proviso the credit of additional duty paid cannot be utilised for payment of service tax on output service only. Therefore you can contest the audit objection by quoting the above proviso.

[MUKUND THAKKAR]

You may go with the view is given by Rajagopalan Ranganathan, if auditor is not agree than taking memo from him and given written submission with your disagreement of points.

AI Summary

Assessee Challenges Auditor's Objection on 4% ADI Credit, Cites Rule 3(6) of Cenvat Credit Rules 2004 An assessee received inputs and capital goods from another unit, with both basic duty and 4% Additional Duty of Customs (ADI) debited. The auditor objected to the credit of 4% ADI taken by the assessee, arguing it was not permissible. However, the assessee disagrees, citing Rule 3(6) of the Cenvat Credit Rules, 2004, which allows such credit. An expert clarified that if both units are manufacturers, the objection is baseless, as the credit cannot be used for service tax but is valid for manufacturers. Another expert suggested documenting the disagreement if the auditor persists.