Cenvat credit interest on rcm

This query is : Resolved

madhup (Querist)
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30 November 2015 Dear sir I have taken cenvat credit on 30/11/2014 on invoice date for security services and I paid service tax my portion on Reverse charge mechanism on 05/12/2014. as per service tax audit , he has insisted to pay interest for one month from 30/11/2014 to 31/12/2014 on prior taken cenvat credit. kindly confirm the calculation.

Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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30 November 2015 Under Reverse Charge Mechanism the CENVAT Credit document is the GAR - 7 Challan and not the service provider's invoice. Therefore an assessee becomes eligible for availing CENVAT credit one day after the date of GAR - 7 Challan. In Your case the tax was paid on 5th December 2014 and therefore you are eligible for CENVAT Credit on RCM only from 6th December 2014. This pertains to the 75% (as was the law till 01.04.2015) service tax paid by you. For the balance 25% recovered by the service provider you can avail the Input Credit on the date of invoice (provided the bill is settled within 180 days).
Therefore, the demand of the Departmental Audit Party is justified and correct and you should pay the interest forthwith. However, if you have not utilized the credit to pay off your output liability no penalty is leviable.
This opinion is given on the basis of law applicable in November - December 2014.