rule 6, sub-rule (3) clause (ii)

[mukesh pareek]

Dear Experts,

A Manufacturer of dutiable and exempted products maintaining separate accounts for input material and taking Cenvat credit accordingly but he can''t maintain separate account for input service.

Manufacturer want's to follow rule 6, sub-rule (3) clause (ii) so can anyone explain this simply ( Do not copy as mention in manual because i can't understand)

Someone said me that if your last year ration is 85 : 15 ( 85 exempted sale and 15 Dutiable sale ) then you can take partial 15% credit of total input service for whole next year.

please advise

[KASTURI SETHI]

Sh.Mukesh Pareek Ji,

You have two queries. Query-wise reply is as under:-

1. No doubt formula is not simple. You will have to resort to C.A.'s certificate for error proof reversal under Rule 6(3) (ii). Such certificate is subject to verification by the department.

2. Totally wrong.

 

[Rajagopalan Ranganathan]

Sir

Q.1: Rule 6 (30 (ii) of Cenvat Credit rules, 2004 mandates "to pay an amount as determined under sub-rule (3A). Whether you like the provisions of rule 3A or not you have to follow it.

Q.2: Reversing the credit od input services used in exempted goodsiservices in the ratio indicated by you have no legal sanction. Even if you do so department will not accept it on the ground that it is beyond the scope of Cenvat Credit rules, 2004 and you have to undergo unnecessary and fruitless litigation.

[KASTURI SETHI]

Agreed with Sh.Rajagopalan Ranganathan, Sir.

[mukesh pareek]

Dear Experts,

Thanks for your valuable advise.

Still i am looking forward for a simple formula / ratio to overcome from this issue.

let me know if more data required from my side.

Thanks in advance.

[mukesh pareek]

Dear experts,

Can we adopt below formula to take Cenvat credit of service tax on those service which used in manufacturing of exempted and dutiable goods.

also please confirm that is it necessary to apply this from 1st April or we can apply in between year also ?

2015-2016
Particulars	Amount
Exempted Goods Sales	8500
Taxable Goods Sales	1500
Total Sales	10000
% of Exampted Sales	85%
	2016-2017
	Apr	May	June	July
Total Credit	5000	5000	5000	5000
Ineligible Credit	1000	1000	1000	1000
Eligible Credit	0	0	0	0
Common Credit	4000	4000	4000	4000
Ineligible Common Credit (85%)	3400	0	0	0
Eligible Common Credit	600	4000	4000	4000
# 2015-2016 sales ratio is actual.
# on base of 2015-2016 sales ratio assessee can reverse provisionaly in year 2016-2017 and difference can be paid before 30th June-2017.

AI Summary

Cenvat credit apportionment: apply the Rule 6(3A) mechanism with required CA certification; sales ratio shortcuts not permitted.
Apportionment of input service credit for manufacturers of dutiable and exempted goods must follow Rule 6 read with sub rule (3A); a chartered accountant's certificate under Rule 6(3)(ii) may be used to support reversal calculations but is subject to departmental verification. Simple application of a prior year sales ratio to claim proportional service credit is not legally sanctioned and may be disallowed; provisional reversals based on past sales must be reconciled and adjusted as required by the rules.