Payment of amount under rule 6(3) after utilising cenvat

[SRINIVAS PALAKODETI]

CAN THE AMOUNT TO BE PAID UNDER RULE 6(3) AND RULE 6(3A) OF  Cenvat Credit Rule, 2004 BE PAID AFTER UTILISING THE CENVAT CREDIT LYING IN BALANCE OR TO BE PAID IN CASH.

[Surender Gupta]

The amount to be paid under rule 6(3) or 6(3A) amounts to reversal of Cenvat Credit and can be paid either through cenvat credit or through cash. You may refer the explanation II below the rule 6(3A) which reads as "Explanation II.-The amount mentioned in sub-rules (3) and (3A), unless specified otherwise, shall be paid by the manufacturer of goods or the provider of output service by debiting the CENVAT credit or otherwise on or before the 5th day of the following month except for the month of March, when such payment shall be made on or before the 31st day of the month of March."

[Guest]

Firstly there is no amount payable u/r 6(3A). The amount payable is u/r 6(3) only. For the purpose of quantification though we need to revert to rule 6(3A).

To explain let me illustrate:

Rs. 1,000 is the total available credit paid by the assessee towards common input services. The previous year's ratio of Exempted goods and services to total goods and services (both exempted and taxable) comes to 60%, than out of Rs. 1,000/-,  Rs. 600 (i.e. 60%) is amount quantified u/r 6(3A). The assessee shall avail Rs. 1,000 under Rule 6(1). Out of this it shall utilise Rs. 600 towards payments u/ r 6(3). Balance Rs. 400/- it could utilise for payment of duty on taxable goods or taxable services.

This is clear from congoent reading of

a) Rule 6(3) which is notwithstanding rule 6(1) and (2) and clearly provides for the what amount is payable, with

b) Explanation II, which talks about how the payment is to be made i.e. "by debiting the CENVAT credit or otherwise" with

c) Form ER-1, which at clause 8 point no. 13 clearly provides for disclosure of utilisation of CENVAT credits for payments of amount under Rule 6. 

Thus in case if the whole amount of CENVAT for common input or input services are not to be utilised but only the amount proportiante to the amount used for taxable goods/ services,  than one may directly resort to rule 6(2) and not come to rule 6(3) atall. It is only when the entire amount is to be utilised that the amount to be reversed is to be worked out u/r 6(3A). 

AI Summary

Cenvat reversal payment: rule 6(3) may be discharged by debiting CENVAT credit or by cash as prescribed. The amount payable under rule 6(3) is a reversal of CENVAT credit and may be paid either by debiting CENVAT credit or by cash under Explanation II to rule 6(3A); rule 6(3A) provides the method to quantify the reversal while rule 6(3) (notwithstanding rules 6(1) and 6(2)) prescribes the reversal obligation. Form ER 1 requires disclosure of such utilisation, and where only the taxable attributable portion is used, rule 6(2) should be applied.