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?

[Shilpi Jain]

Possible argument. But this issue will be settled in Courts only in case anybody takes this stand.

[Sadanand Bulbule]

Dear Murthy

Peruse the comprehensive discussion on the subject query at Issue ID No.119302.

AI Summary

Transitional CENVAT credit dispute over reversal when opting for composition scheme questions applicability of blocked credit rules. A builder carried forward transitional CENVAT credit into a composition period after partially utilising it prior to 2019. Enforcement contends such carried-forward ITC must be reversed on migration to the composition scheme; the builder reversed ITC on regular purchases but disputes reversal of transitional CENVAT, arguing section 17(2) read with rule 42 does not restrict transitional CENVAT and that it remained available for utilisation against output tax up to 2022-23. The matter involves an interpretive conflict likely requiring judicial resolution.