Reversal of Cenvat Credit

[Murari Agrawal]

Dear Experts,

We are manufacturing parts of footwear (64062000) & paying duty @6% as per entry S.No.5A of notification no. 5/2006/CE dated 1.3.2006 as amended. The duty on our inputs is 12%. As a result, the Cenvat Credit is not utilised fully and is being accumulated and carried forward. We are not taking SSI exemption and paying duty from day one. Letter opting for notification no. 8/2003 as amended is submitted every year.

During the course of Audit, C.E.Officer has given a spot memo asking ' why excess amount of Cenvat Credit, which is brought forwarded to next year, has not been reversed when you are availing Concessional rate of Duty on the final products'.

I think there is no such requirement in law. I solicit your valued opinion on the issue.

[YAGAY andSUN]

There is inflated duty structure on your poducts.  There is no need to reverse the CENVAT credit.  Please ask the Audit Team under which provision of the C.E. Act read with Rules they are asking for reversal of CENVAT credit.

Pradeep Khatri

[email protected]

AI Summary

Cenvat credit reversal when concessional duty applied - no reversal required; auditors should cite statutory provision. Whether a manufacturer availing a concessional duty rate must reverse accumulated Cenvat Credit carried forward when inputs attract higher duty. The advisory view is that differing duty incidence does not, by itself, create a requirement to reverse Cenvat credit and auditors should be asked to cite the specific statutory provision and rules authorising any reversal.