Cenvat Credit

[Team PMP]

Dear Expert,

Brief:

Assessee is a partnership firm having business of builder and developers. Incorporated during the period 2011 - 2012. He was not regular payer of service tax and it opted for VCES scheme and paid all outstanding service tax till the VCES period scheme Dec-2012.

Facts:

1. The total Cenvat credit till the VCES scheme period was ₹ 7 lakhs.
2. Assessee never filed the service tax return for the period covered under VCES scheme i.e from Apr-11 to Dec-12.
3. Service Tax Liability on output services for Jan-13 to Mar-13 was ₹ 6 lakhs
4. Assessee assumed that Cenvat credit of ₹ 6 lakhs was available for payment of service tax liability and hence no service tax is due for the quarter.
5. Assessee failed to file Service Tax return Jan-13 To Sep-13
6. Assessee filed its first return for the period of Apr-13 to Sep-13
7. The balance Cenvat credit of ₹ 1 lakh pertaining to VCES period was utilized for payment of Service tax liability for the quarter Oct-13 to Dec-13.

Objection raised by Department:

The Cenvat credit of ₹ 6 lakhs was never availed by Assessee in its return. As per new rules of CENVAT credit, the Cenvat credit should be availed within 12 month of date of invoice. As on today’s date the period of 12 month have been already lapsed and hence the Cenvat credit for the same cannot be availed today. Department is of view that even after filing the delayed service tax return for the period Jan-13 to Mar-13, Assessee is not eligible to claim the said Cenvat Credit of that period because the date of filing the service tax return is post the amendment of CENVAT credit Rules

Our View:

Our view is that, though the return is getting filed after the amendment in CENVAT credit rules i.e 1 Sep, 2014, it pertains to period prior 1 Sep, 2014. Hence the time limit of availment was not applicable to that period. Therefore Assessee should get the CENVAT credit of 6 lakhs

Query:

Now, we need your expert advice on the above matter that can we availed and utilize the Cenvat credit for that quarter which is not filed but this period is of before October 2014?

AI Summary

Cenvat credit timelimit: pre-amendment credits may be claimable despite belated returns, but invite enforcement risk.
A firm paid tax under VCES but did not file returns or avail Cenvat credit for that period; VCES rules prohibit using Cenvat to pay scheme dues, while the Cenvat Credit Rules and subsequent amendment introduced a time limit for availment. Authorities may disallow credit claimed after the amendment date even if it pertains to a pre amendment period, but administrative circulars and some commentators treat VCES compliance as final and contend the one year limit should not retrospectively bar pre amendment credits, creating a litigation risk for belated availment.