Common input services for manufacturing and trading - What to reverse
IN a recent Judgement of the CESTAT, the issue was the quantum of reversal of CENVAT Credit in the case of Common input services for manufacturing and trading, for the period prior to 1.4.2011.
Trading became ‘exempted service' only w.e.f. 01/04/2011. It cannot be considered even as a service prior to that. The assessee cannot take credit of input services used for trading, which was neither taxable service nor exempted service prior to 01/04/2011. Hence that portion of credit availed on input services used for trading is not admissible. The question is how to arrive at the quantum used for trading when no separate accounts are maintained.
In the instant case, the original authority has adopted the formula given in Rule 6(3A)b(iii). This provision deals in situation when there is both dutiable goods / taxable services and exempted goods / exempted services. It does not mention trading. Prior to 01/04/2011 the only method of computation available was the method in case of exempted services and original authority adopted such method. The computation method taken by the appellant to arrive at the figure is the method for computing in case of trading w.e.f. 01/04/2011. As this is the formula / method provided by legislature for computing value in case of common inputs / input services used for trading activities when there is no separate accounts, the application of this method to arrive at the value would be more appropriate though it was introduced w.e.f. 01/04/2011 only.
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