JULY 11, 2014

By Abhijit Saha, Director (Indirect Tax), BDO India

CENVAT Credit Rules, 2004 (CCR) has been amended to state that a manufacturer or a service provider shall take credit on inputs and input services within a period of six months from the date of issue of invoice, bill or challan with effect from 1 st September, 2014. Such amendment has been introduced as proviso to Rule 4(1) and fifth proviso to Rule 4(7) of the CCR.

This reminds me that such restriction was once imposed long time back during the time of Modvat Credit Rules and then subsequently withdrawn. It seems the Board has not learnt from its mistake. They have again introduced such draconian provision which curtails the accrued right of the assessee.

It is understandable that the refund claim has to be made within one year from the date of payment of duty and similarly the demand has to be made within one year from the relevant date for short levy or non-levy. There is an administrative justification to it. However, if a right has accrued to an assessee in a similar manner as credit of money by way of deposit in the bank account, can anybody contend that if you do not update your pass book within six months such deposit would get reversed?

Moreover, in case of partial reverse charge, credit would be available only after the payment of the value of the input service and service tax thereon. So if the said payment is made after six months from the date of tax invoice by the service provider, then the right to avail the CENVAT credit is denied before it is accrued to the assessee. This is ridiculous.

In case, the payment to the service provider is not made within three months from the date of invoice, then the CENVAT credit so taken has to be reversed. Again the said tax amount can be re-credited once the payment is made. There is no time limit for such re-credit. Now, since no credit can be taken after six months from the date of the invoice, how such re-credit can happen. The restriction clause of six months does not specify that it is the first credit and re-credit is not covered by the restriction to avail the credit.

In the same way re-credit of CENVAT credit reversed on account of non-receipt of export proceeds within the stipulated period or extended period is to be allowed, if the export proceeds are received within one year from the period so specified or extended period. This can be done on the basis of the documents evidencing receipt of export proceeds. In such an event, how does the restriction of six month time limit apply?

In view of the above, it may be stated that the law should not be made to illegally deprive the tax payer and the rightful claim of the assesse should not be taken away for reasons which are not legally valid and in no way reflect public interest.