CENVAT credit transitioned was utilised during composite period by the builder.

[KALLESHAMURTHY MURTHY K.N.]

Dear all,

A building contractor has availed transitional credit under CENVAT and utilised some part of it up to 2018-19. In 2019-20 he opted for composition but carried forward all ITC including ITC on other purchases made up to 2018-19. The Enforcement authorities have identified that the ITC was wrongly carried forward into the composition period and asked to reverse the entire ITC. The builder reversed the ITC carried forward relating to regular purchases but opposed reversing of CENVAT credit contending that the restriction of transitional CENVAT credit under sec. 17(2) r/w rule 42 does not arise and is entirely eligible to utilise and also set off against output tax liability up to 2022-23. Is CENVAT utilised correctly, since he cannot forego CENVAT credit?

AI Summary

Contractor Challenges Reversal of CENVAT Credit Under Composition Scheme, Awaits Legal Resolution on ITC Usage Rules A building contractor utilized transitional CENVAT credit during the composite period, carrying forward input tax credit (ITC) from purchases made up to 2018-19. In 2019-20, the contractor opted for a composition scheme but was asked by enforcement authorities to reverse the ITC carried forward, including regular purchases. The contractor reversed ITC for regular purchases but contested reversing CENVAT credit, arguing it was eligible for use against output tax liability until 2022-23. Responses suggest the issue may require court resolution to determine the correct utilization of CENVAT credit.