A dealer has wrongly taken 100% Input tax credit without reversing the proportionate credit in respect of flats sold post Completion Certificate. Neither he has intimated the department about receiving the Completion Certifcate. The department has raised a show cause on the builder asking it to pay 7% on the exemted receipts of flats sold after CC as per Rule 6 of Cenvat Credit Rules. The Input tax credit reversal is quite less as compared to tax payable on exempted services.
Kindly guide how to reply and any judgement in favour....
Builder Faces Show Cause Notice for Excessive Tax Credit Claims Under Rule 6, Cenvat Credit Rules A builder mistakenly claimed full input tax credit without adjusting for flats sold after obtaining the Completion Certificate, failing to notify the tax department. Consequently, the department issued a show cause notice demanding 7% tax on exempted receipts per Rule 6 of the Cenvat Credit Rules. The input tax credit reversal is significantly lower than the tax due on exempted services. A respondent suggests the case is defensible legally and references a relevant case, M/S. Aster Pvt. Ltd. versus CC&CE, Hyderabad, indicating that the legislative intent was not to allow disproportionate tax credit claims. (AI Summary)
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