Government Finances - an overview

Cenvat credit on input services was allowed to manufacturer availing SSI exemption in 2010-TIOL-200-CESTAT-AHM due to two reasons:
(1) Notification No. 8/2003-CE does not provide for denial of Cenvat credit on input services.
(2) As per the title of Rule 6 of CCR,2004, it could be applied only when the assessee is engaged in manufacture of dutiable AND exempted goods OR as provider of dutiable AND exempted services.

As regards, title of Rule 6, the case analysis of TIOL contains following tail piece:
“If rule 6 of the CENVAT Credit Rules is only applicable for cases where both dutiable and exempted goods are manufactured, then, under which rule CENVAT Credit has to be denied to the units manufacturing only exempted goods?”
http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=10342

I had also written an Article in this regard:
http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=10587

Now, title of Rule 6 has been changed to “Obligation of a manufacturer or producer of final products and a provider of output service” from the old one “Obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services.”. However, Condition 2(iii) of Notification No. 8/2003-CE still provides for non-availment of Cenvat credit on inputs only and not on input services.

It is felt that provisions Rule 6(1) will prevail and Cenvat credit on input services should not be admissible to manufacturers availing SSI exemption.

The views expressed are personal views.

Shvetal Parikh 26/06/2015