'In or in relation' – removed from Rule 2(k) only to be added to Rule 6(1)?
SIX is the most sought after number in a country gripped by cricket fever. So is number 6 during the Budget Season. Some important changes have been made to Rule 6 of the Service Tax Rules, 1994 and Rule 6 of the CENVAT Credit Rule 2004. Yesterday we discussed about Rule 6 of Service Tax Rules. Now it is time for the other 6.
Rule 2(k) of the CENVAT Credit Rules 2004 has been amended to re-define the input as “all goods used in the factory of the manufacturer of final products or…..”. There is no in or in relation in amended rule 2(k). Now, let us see Rule 6(1) before and after amendment:
Before | After |
|---|---|
The CENVAT credit shall not be allowed on such quantity of input or input service which is used in the manufacture of exempted goods or for provision of exempted services, except in the circumstances mentioned in sub-rule (2). | The CENVAT credit shall not be allowed on such quantity of “input used in or in relation to the manufacture of exempted goods or for provision of exempted services, or input service used in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provision of exempted services, except in the circumstances mentioned in sub-rule (2). |
How to understand the above change? Assuming that the removal of “in or in relation” from Rule 2(k) will enlarge the scope of inputs, then does it mean that the assessee needs to pay only credit on inputs used in or in relation to the manufacture of exempted goods? Is the above change intentional? Will the CBEC please clarify?