Board responds - No CENVAT Credit on 1% duty paid on Coal and Fertilisers
IN our Budget Analysis, we carried an article Is CENVAT Credit admissible on 1% duty paid on coal now? by a departmental officer. It was pointed out in the article that an amendment to CENVAT Credit Rules, 2004 is required to deny the unintended benefit of CENVAT Credit of 1% duty paid on goods like coal, which are now covered under Notification No 12/2012 CE. The CENVAT Credit Rules 2004 prohibit taking credit on goods exempted under Notification No 1/2011 CE. Now that some items like coal and fertilizers have been moved to Notification No 12/2012 CE, inadvertently, CENVAT Credit became admissible on these items.
Board has done a quick fire fighting and amended the CENVAT Credit Rules now.
As per the latest amendment, Coal and Fertilisers covered under Sl No 67 and 128 of Notification No 12/2012 respectively are also to be treated as exempted goods as per the amendment to Rule 2(d). Further CENVAT Credit shall not be admissible on these goods to the buyers in view of the latest amendment to Rule 3 (1)(i).
Had these changes been not brought in quickly, a huge amount of unintended CENVAT Credit would have been “legally admissible".
Another important amendment has been made to exclusion provided under (BA) in Rule 2(l) of the CENVAT Credit Rules. The effect of this amendment is:
Prior to the amendment in the Budget, credit on services of General Insurance and Repair in respect of Motor Vehicles was admissible only in cases where the Motor Vehicles are admissible for CENVAT Credit as capital goods for assessees. During this year's Budget, an amendment has been made to this restriction with the objective of expanding the CENVAT Credit on the above two services to the manufactures of Motor Vehicles and Output service providers engaged in insurance / re-insurance of Motor Vehicles. But in the process, they have removed the assessees who are using Motor Vehicles as Capital goods from the eligibility. Now with the latest amendment, the same is restored by suitable amendment to the exclusion (BA) under Rule 2(l) of the CENVAT Credit Rules, 2004.
Notification No. , Dated: March 27, 2012