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20 August, 2014

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6 Months Cenvat Limitation Era– Begins from 1.9.2014–Few Important Alerts you must Know

Notification No.  21/2014-C.E.  (N.T.),  dated  11-7-2014  issued pursuant to recent budget provides  for inserting proviso under Rule 4 of  the Cenvat Credit Rules,  2004  with  effect  from  1-9-2014  specifically providing  that a manufacturer  or  the  provider  of  output  service  shall  not  take CENVAT credit after six months of the date of issue of the documents specified in sub- rule (1) of Rule 9 of the said Rules. 

Action-AlertThus, by way of this amendment the time limit for availing Cenvat credit on  inputs  and  input  services  has been  curtailed  to  six months  from  the date  of  issue  of  the  document  such  as  invoice,  bill  of  entry,  challan, supplementary invoice, etc. 

Quick Points to ponder :-
a) Department may hold view that going by plain interpretation of the notification, the cenvat of input and input services prior to 6 Months from 1.9.2014 shall lapse if not availed by 31.8.2014

b) Whether the same notification would have a impact on ongoing litigations where the demands is upheld by the appellate authority.

c) A very clear scrutiny is required to be conducted by all the assessees in regard to the cenvat availed by them and cenvat not availed due to several reasons possible.

d) This amendment is not applicable on capital goods. (Hence No Limit there)
                                  Wishing you a Smooth Cenvat Hunting !!
Since this amendment will be effective from 1-9-2014, any Cenvat credit on  inputs  and  input  services  which  has  not  been  availed  within  six months  from  the  date  of  issue  of  invoice will  lapse  on  1-9-2014. Such  Cenvat credit cannot be availed even if those are eligible inputs and input services. 

In  light  of  the  above,  it  is  advisable  that  all  eligible  inputs  and  input services  on  which  Cenvat  credit  has  not  been  availed  so  far  shall  be  identified  / verified and Cenvat credit  shall be availed before 1-9-2014.

This is to ensure that credit on the eligible inputs and input services does not lapse. It may  be  noted  that,  in  the  absence  of  any  specific  clarification with regard  to  the  applicability  of  time  limit  for  the  credit  not  availed  upto   1-9-2014,  the Department may  take  a  view  that  the  time  limit will  be applicable to invoices  issued prior  to 1-9-2014 also, if  the Cenvat credit is not availed before 1-9-2014. Accordingly, disputes may be  raised on the eligibility of Cenvat credit  if  the same  is availed after  the expiry of six months from the date of invoice, even if invoices were received prior to 1-9-2014. 
Further, disputes on applicability of time limit may also arise in cases of pending  litigations  on  eligibility  of  the Cenvat  credit  and  also  in  cases where alternative argument of eligibility of Cenvat will arise, in case the demand ultimately succeeds.   It  is advisable  to evaluate  these situations also  and  take  appropriate  action  so  that  the  credit  is  not  missed  on account of delay once the cases are decided.

Post  1-9-2014,  you may  ensure  that  the  credit  is  taken well within  the prescribed period of six months.

About the Author:
CA Ankit Gulgulia (Jain)

Author is Practicing Chartered Accountant in New Delhi/NCR and specializing in Indirect Taxes, Corporate Laws and Transfer Pricing. He can be reached at or at +91-9811653975

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