Cenvat credit reverse against Discount

[RAM SHARMA]

Dear Experts,

We are a manufacturer unit. We are availing extra discount on some input services after cross the certain limit. Whether we have to reverse cenvat credit on such input services due to raise the debit note for availing the discount. Pl advice.

Thanks

[CSSANJAY MALHOTRA]

Dear Mr. Sharma,

No CENVAT Credit reversal is required for subsequent discounts until and unless the supplier recovers the excise duty component from the buyer of goods and the fact of same has to be evidenced from the Credit Note of Supplier. Higher authorities judgments are even against the department.

[Rajagopalan Ranganathan]

Sir,

Due to higher discount the supplier raise a credit note with reference to the price (transaction value) without affecting the duty already paid by him then no reversal of cenvat credit will arise.

[Ganeshan Kalyani]

Sir, I guess the querist intend to say that - he has availed service tax credit on input service and adjusted against his output excise duty payable. Now since he is a regularly availing service from a particular service provider he got a discount by way of debit/credit note, as the case may be. Now that he has to paid less to the service provider to the extent of discount, whether he is required to reverse the Cenvat credit already taken based on the invoice. (Please validate my assumption).

If the case is as above then in my view yes the reversal is required. Thanks.

[YAGAY andSUN]

The appended SC judgment may be useful in this matter.

2016 (8) TMI 1071 - SUPREME COURT Commissioner of Central Excise, Madras versus M/s Addison & Co. Ltd.
 

[KASTURI SETHI]

Sh.Ram Sharma Ji,

I think your query is somewhat incomplete. It requires elaboration. I intend to make you aware additionally (being away from the main issue) to the extent that 'Debit Note' is an instrument in the eyes of the department for additional consideration to fetch more revenue in Govt.'s kitty.. Whenever audit is conducted, every audit team asks for debit notes to examine additional consideration.

Just for knowledge sake.

[RAM SHARMA]

Mr. Ganeshan Kalyani Sir assumtion is right. We are availing service tax cenvat and adjusted against excise duty payable. For example we are availing cenvat credit on freight up to place of removal. After cross the billing on ₹ 100000/- , he is providing 5% extra discount to us. Hence, we want to know, whether we have to reverse cenvat credit on this amount. Please advice.

Thanks

[KASTURI SETHI]

Sh.Sharma Ji,

Reversal required.

[RAM SHARMA]

Respected Sir,

What about in GST in this regard.

Thanks

[KASTURI SETHI]

Dear Sh.Sharma Ji,

Leviability of Central Excise duty will be shifted from the stage of 'manufacture' to 'supply' in GST. The whole scenario will change after implementation of GST BUT FRAMEWORK (ESSENCE) WILL REMAIN SAME.In other words, sections,rules etc. will be given new nomenclature but will not loose it original character in its essence.

This is my view.

[CSSANJAY MALHOTRA]

Dear Friends,

Discount not known at the time of removal of goods forms part of Assessable Value and accordingly duty is to be paid on removal. (Exception is Provisional assessment). Any discount given after removal are eligible for any refund of duties until and unless unjust enrichment is evidenced.

In the recent case, party has adjusted CENVAT Credit and if discount is allowed afterwards and the same is mentioned on the credit note without reference to the duty involved therein, then NO CENVAT REVERSAL required.

Discounts subsequent to removal can be price discount or Reduction in price don't qualify for CENVAT reversal.

Further in GST Regime, Debit Notes / Credit Notes are statutory document and the principle of unjust enrichment therein also has to be prooved to claim back refund from Excise Department.

[KASTURI SETHI]

Sh.CS Sanjay Malhotra Ji,

Thanks for such comprehensive and penetrative reply on the issue. I agree with you. I further want to infer as under:-

"The manufacturer is getting discount from pocket of his buyer in this case and without disturbing the element of duty." Am I right ?

[CSSANJAY MALHOTRA]

Dear Sh. Kasturji ji,

Precisely True, have consider same while sharing my submissions or had the duty been disturbed, your views stands correct.

[Ganeshan Kalyani]

Sir (querist), I have in the last para of my previous reply opines that reversal is warranted.

Sri Kasturi Sir, the query is not getting discount from buyer but from his service provider.

The excise duty is not disturbed directly but has an indirect effect the credit of service tax was taken against output excise duty payable. Thanks.

[KASTURI SETHI]

Sh. CS Sanjay Malhotra Ji,

Frankly admitting I should have written the words, " Reversal required, if duty paid character is not disturbed."

I agree with Sh.Ganeshani Kalyani Ji to the effect that I should have mentioned the word, 'Service Provider' instead of buyer.

[KASTURI SETHI]

I want to correct myself. Pl. read "Reversal required, if duty paid character is disturbed."

[Ganeshan Kalyani]

Sir Sri Kasturi Sir, I learn a lot from you. I have high respect for you. Thanks for your company. Thanks.

AI Summary

Debate on Reversing CENVAT Credit for Input Services After Discounts: Experts Weigh In on Excise Duty Impact A manufacturing unit inquired about the need to reverse CENVAT credit on input services after receiving a discount, as evidenced by a debit note. Experts in the forum provided differing views. Some suggested no reversal is necessary if the excise duty component remains unaffected, while others argued for reversal if the discount impacts the service tax credit used against output excise duty. The discussion also touched on the implications under GST, where the treatment of discounts and the requirement for reversal depends on whether the duty paid character is disturbed.