Cenvat credit on Proportionate basis

[sunil mehta]

1)A proprietory firm is carrying on trading activities in yarn.They are yarn dealers for many yarn manufacturers. 2)They also get commission on sale of their yarn products every month. 3)o other actvity is carried on except yarn trading & commission income. 4)Proprietory firm has incurred foll: common expenditure in carrying out above two activities from same premises: ---i)telephone /mobile exp ---ii)audit fees/c.a.consulting fees ---iii)constructon of office premises(major renovation rs.4 lacs)---eligible for 100% credit ---iv)office insurance ---eligible for 100% credit query:1)since firm is carrying out only one taxable service (other being trading of yarn)whether cen.credit on above expenditure can be claimed proportionately in ratio of yarn trading & yarn commission ? 2)since there is only one taxable services whether whole amt. of cenvat credit can be claimed commission output services? 3)If no, then in what manner?

AI Summary

Cenvat credit apportionment: input service credit must be allocated between taxable commissions and trading under available rule options.
Entitlement to Cenvat credit on common input services used for both trading and commission-based taxable services must be determined under Rule 6 options: maintain separate accounts and claim credit for the taxable portion only; take full credit but follow utilization restrictions against output service tax; or perform proportionate reversal/adjustment based on turnover proportions subject to specified conditions. The proportionate apportionment between trading and commission income is a viable method, while certain annual adjustment procedures may be limited to specific categories.