Restaurant Service & CENVAT credit - a dissertation

Explanation under Rule 2C of ST Valuation Rules, 2006 clearly clarifies that the provider of taxable service shall not take Cenvat credit of duties or cess paid on any goods classifiable under Chapters 1 to 22 of CETA, and there is no restriction on availing 100% credit on Input Service.

Explanation under Rule 3 of CCR is specific that " where the provisions of any other rule or notification provide for grant of whole or part of exemption on condition of non-availability of credit of duty paid on any input or capital goods, or of service tax paid on input service, the provisions of such other rule or notification shall prevail over the provisions of these rules. The word "rules" refers CC Rules, 2004.
So there is no scope for reversal of proportionate credit under Rule 6 of CCR in respect of Restaurant Service.
Moreover, as per Second Proviso to Rule 6(3) of CCR, if any part of value of taxable service has been exempted on the condition that no Cenvat credit of inputs and input services, used for providing such taxable service, shall be taken then the amount specified in clause (i) shall be six percent of the value so exempted. Here the wording used is "conditions that no Cenvat credit of "INPUTS AND INPUT SERVICES". So the liability to pay 6% or reverse proportionate credit arises only when non-availability of "inputs AND input services are specified thereof. In Rule 2C non-availability of credit on inputs is only indicated so that provisions of Rule 6 itself not applicable to Restaurant Service. The disputes in this regard is unwarranted and undesirable as curious Auditors are waiting to jump on the assessee.

Unnikrishnan P 29/07/2015