IN what
could be termed a draconian development, Rule 4(1) of the CENVAT Credit Rules,
2004 is proposed to be to amended with effect from September 1, 2014 to provide
that the manufacturer or the service provider should avail of CENVAT credit of
the duty paid on inputs or the service tax paid on input services, within 6
months from the date of the relevant document specified in Rule 9(1) of the
CCR, 2004, eg. Invoice. The proviso to Rule 4(7), in terms of which, the
service recipient who has taken CENVAT credit on the basis of the receipt of
the documents referred to rule 9(1) of the CCR, 2004 is required to reverse the
credit if the payment is not made within 3 months of the date of the input
invoice, etc. stands.
As we
know, there is no time limit, as of now, under the central excise law, for
availment of CENVAT credit. Courts have held that, in the absence of a time
limit prescribed under law, credit can be taken even at a later stage and in
some cases, assessees have been allowed to avail of credit, even after some
years. This benefit is gone now, with the proposed amendment, fixing the time
limit for credit availment, at 6 months from the date of the invoice, etc.
A
combined reading of these sub-rules of Rule 4 makes it clear that, the assessee
needs to meet the following two conditions for availment of CENVAT credit, on a
cumulative/parallel basis, viz.
++
Credit to be availed within 6 months of the date of the input invoice
++
While credit can be availed on receipt of the invoice pertaining to input
service, payment will have to be effected within 3 months from the date of the
invoice, failing which, the credit availed should be reversed.
Assume
a case, where the assessee actually receives the service provider's invoice
dated September 1, 2014 on January 31, 2015. While the assessee can avail of
credit on January 31, 2015 on receipt of the input invoice, he would still have
to effect the payment for the value of the input service on or before February
28, 2015, as the last date for availment of credit in this case, is February
28, 2015, i.e. 6 months from the date of the input invoice. In other words, the
benefit of 3 months' time frame for payment of the value of the input service,
vis-à-vis availment of CENVAT credit, would be subject to the overall limit of
6 months fixed for availment of credit by the new amendment. We do not have a
similar provision under the VAT laws, fixing a time frame for availment of
input tax credit. Further, availment of input tax credit is not linked to the
payment for the purchase of inputs.
The
proposed amendment, in respect of the reverse charge mechanism, in terms of
which, the point of taxation in respect ofservices would be the date of the
payment by the service receiver or the first day after 3 months of the date of
the invoice, whichever is earlier, appears draconian, to say the least. Due to
this amendment, the liability under RCM would get triggered on the earlier of,
the date of payment of the invoice by the service recipient or the 91 st day
from the date of the invoice. Prior to this amendment, the service recipient
had a time frame of 6 months to effect the payment, failing which, the point of
taxation was reckoned as the date of the invoice.
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