For elaborated formula prescribed in rule 6(3A) - click here

Legislature has amended the provisions of rule 6 of Cenvat Credit Rules, 2004 and inserted sub rule 3A to provide the manner in which cenvat credit is to be determined which is attributable to exempted goods and exempted services, where separate books of account are not been kept.

We have observed that there is some inadvertent mistake in rule 6(3A)

In the condition of 6(3A)(C)(iii)  the letters assigned to terms are not correct:

The present reading of rule 6(3A)(C)(iii) is as follows:

"(iii) the amount attributable to input services used in or in relation to manufacture of exempted goods or provision of exempted services = (M/N) multiplied by P, where L denotes total value of exempted services provided plus the total value of exempted goods manufactured and removed during the financial year, M denotes total value of taxable and exempted services provided, and total value of dutiable and exempted goods manufactured and removed, during the financial year, and N denotes total CENVAT credit taken on input services during the financial year;"

Where, the correct condition should have been as follows:

"(iii) the amount attributable to input services used in or in relation to manufacture of exempted goods or provision of exempted services = (M/N) multiplied by P, where M denotes total value of exempted services provided plus the total value of exempted goods manufactured and removed during the financial year, N denotes total value of taxable and exempted services provided, and total value of dutiable and exempted goods manufactured and removed, during the financial year, and P denotes total CENVAT credit taken on input services during the financial year;"

 We with the mistake may be corrected soon.

Allocation of Cenvat credit: corrected variable assignment clarifies formula for attributing input service credit to exempted goods and services. Amendment to rule 6(3A) prescribes a formula to allocate Cenvat credit attributable to exempted goods and services where separate books are not kept. The press release identifies a drafting error in clause (C)(iii): variable letters were misassigned. The correct reading assigns M to total value of exempted services plus exempted goods removed during the year, N to total value of taxable and exempted services plus dutiable and exempted goods removed during the year, and P to total Cenvat credit taken on input services during the financial year.