Why is Courier service not figuring in rule 6(5) of the CCR, 2004?
We received this painful mail.
Sir, I am faced with a unique and a colossal demand notice of cenvat credit issued by my range authorities courtesy the CERA audit.
Rule 6(5) of the CENVAT Credit Rules, 2004 reads –
(5) Notwithstanding anything contained in sub-rules (1), (2) and (3), credit of the whole of service tax paid on taxable service as specified in sub-clause (g), (p), (q), (r), (v), (w), (za), (zm), (zp), (zy), (zzd), (zzg), (zzh), (zzi), (zzk), (zzq) and (zzr) of clause (105) of section 65 of the Finance Act shall be allowed unless such service is used exclusively in or in relation to the manufacture of exempted goods or providing exempted services.
This sub-rule implies that even if a manufacturer or a service provider produces or provides exempted goods/services along with dutiable final goods/services and avails CENVAT credit of the service tax paid on any of these 17 (seventeen) services but does not maintain separate accounts, he is not hit by the provisions of sub-rules (1), (2) and (3) of rule 6 of the CCR, 2004.
Incidentally, although the non-obstante clause covers a majority of the commonly used services which carry an improbable task of being segregated, this sub-rule (5) does not include the ‘Courier services' specified in sub-clause (f) of clause (105) of section 65 of the Finance Act, 1994.
I fell into this trap and because I took the Cenvat credit of a few thousand rupees on this common Input service viz. Courier service but did not maintain separate accounts, I am faced with a demand of more than a Crore of rupees. When the non-inclusion in rule 6(5) of the CCR, 2004 was pointed out to me by the range authorities, I immediately reversed the entire credit taken on the ‘Courier Services'. But this has not helped my cause and I am now confronted with fighting my case which is going to cost me a bomb.
I happened to come across the Tribunal decision in CCE, Mumbai VI vs. Philips India Ltd. [] where in a similar situation, by placing reliance on the Supreme Court decision in Chandrapur Magnet Wires [] it is held that it was unjust to demand huge amount of Rs.1.09 crores u/r 57AD @8% when the inadmissible credit is only Rs.87 ,569 /-.
Hopefully, if you host this incident in DDT column, the Board will take cognizance of the same and do the needful before much damage is caused.