Cenvat credit of input service tax paid on exempted and taxa

This query is : Resolved

CA SONIYA AGARWAL (Querist)
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13 May 2016 Dear Madam/ Sir,

I have an urgent query with regard to cenvat credit of input service tax paid on exempted and taxable excisable goods in which approx 95% of goods is exempted . Can this cenvat credit of input service tax paid be utilised for payment of output service tax.

Please reply in details giving reference of section , case laws , rules of cenvat credit since I have to be detailed in explaining myself to CBEC for show cause notice by CBEC to my client .

An early reply will be highly appreciated

With Regards

SONIYA AGARWAL

CA Himanshu Ojha

CA Himanshu Ojha (Expert)
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13 May 2016 You are expecting the detailed reply, but for that you should provide the clear details first.

1) You are saying Cenvat credit of Input service tax paid on exempted & taxable excisable goods. Please Note on exempted goods, the Input duty will be NIL and moreover on the excisable goods, there will be Input of Excise duty.
2) If the credit is available to you, the same can be utilized for the payment of duty as per RULE 6 of Cenvat Credit rules 2004. Here you have to check whether your client are providing only taxable services or Taxable & exempted both, because in case if your client are providing both then you have to reverse the Input credit as per the rule 6.
3)You have not stated the period of for which you have received the SCN. Recently by Notification No. 13/2016 CBEC have revised the Rule 6.

With the limited details available, I would suggest you to go through the above referred Rule & decide.