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

Clarification on Cenvat Credit Payments Under Rule 6(3) and 6(3A): Cash or Credit Options Explained A query was raised about whether payments under Rule 6(3) and Rule 6(3A) of the Cenvat Credit Rules, 2004, should be made using the Cenvat credit balance or in cash. One respondent clarified that payments can be made using either method, as per Explanation II of Rule 6(3A). Another respondent emphasized that payments are specified under Rule 6(3), not 6(3A), and explained the calculation process for determining the amount payable, which involves reversing Cenvat credit proportionate to exempted goods and services. The discussion highlighted the procedural aspects and conditions for utilizing Cenvat credit for such payments.