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29 Nov 2014

Adverse Position for Assessees in Respect of Cenvat Credit on Invoices Older than 6 Months

In the recent judgment Mumbai Tribunal in Ashok Leyland Ltd vs. Commissioner of Central Excise, Nagpur 2014 TIOL 2102 CESTAT MUM it was held that as per Rule 57G of CER, 1944 time limit of six months would be applicable even for the consignment which had arrived before the introduction of the procedural restriction.

Rule 57G of CER, 1944 specifically provided that “no credit under sub-rule (3) shall be taken by the manufacturer unless the inputs are received in the factory under the cover of specified documents.” Further, sub-rule (5) specifically provided that “credit shall not be taken by the manufacturer after six months of the date of issue of any document specified in sub-rule (3).”

The Bench adverted to the decision in Osram Surya (P) Ltd. vs. CCE, Indore - 2002-TIOL-64-SC-CX where the Apex Court observed that the substantive right had not been taken away by the introduction of the proviso to the Rule but a procedural restriction was introduced and which was permissible in law. Inasmuch as the time limit of six months would be applicable even for the consignment which had arrived before the introduction of the said proviso.

Presently Notification No 21/2014-CE(NT) dated 11.07.2014 has amended the Rule 4 of Cenvat Credit Rules, 2004

In the said rules, in rule 4,

(a) in sub-rule (1), after the second proviso, the following proviso shall be inserted with effect from first day of September 2014, namely :

"Provided also that the manufacturer or the provider of output service shall not take CENVAT credit after six months of the date of issue of any of the documents specified in sub- rule (1) of rule 9.";

(b) in sub-rule (7),

(ii) after the fifth proviso, the following proviso shall be inserted with effect from first day of September, 2014, namely :

"Provided also that the manufacturer or the provider of output service shall not take CENVAT credit after six months of the date of issue of any of the documents specified in sub-rule (1) of rule 9."

Given the above, the revenue authorities may adopt the ratio of Ashok Leyland decision (supra) in respect of amendment made by Notification 21/2014-CE. Accordingly time limit of 6 months might be applied to invoices issued prior to 1 September, 2014.