Cenvat Credit – Reasonable steps – Board invites suggestions
As per Rule ((3) of the Cenvat Credit Rules, “The manufacturer or producer of excisable goods or provider of output service taking CENVAT credit on input or capital goods or input service, or the input service distributor distributing CENVAT credit on input service shall take all reasonable steps to ensure that the input or capital goods or input service in respect of which he has taken the CENVAT credit are goods or services on which the appropriate duty of excise or service tax as indicated in the documents accompanying the goods or relating to input service, has been paid”.
In English, what this means is when you take credit, you should also take all reasonable steps to ensure that duty/tax is paid on the inputs/input services. But how? How can you ensure that your supplier has paid duty? And what are the reasonable steps? Well, the laws are not all that harsh. According to the Rule
Explanation.- The manufacturer or producer of excisable goods or provider of output service taking CENVAT credit on input or capital goods or input service or the input service distributor distributing CENVAT credit on input service on the basis of, invoice, bill or, as the case may be, challan received by him for distribution of input service credit shall be deemed to have taken reasonable steps if he satisfies himself about the identity and address of the manufacturer or supplier or provider of input service, as the case may be, issuing the documents specified in sub-rule (1), evidencing the payment of excise duty or the additional duty of customs or service tax, as the case may be, either-
(a) from his personal knowledge; or
(b) on the basis of a certificate given by a person with whose handwriting or signature he is familiar; or
(c) on the basis of a certificate issued to the manufacturer or the supplier or, as the case may be, the provider of input service by the Superintendent of Central Excise within whose jurisdiction such manufacturer has his factory or such supplier or provider of output service has his place of business or where the provider of input service has paid the service tax,
and where the identity and address of the manufacturer or the supplier or the provider of input service is satisfied on the basis of a certificate, the manufacturer or producer or provider of output service taking the CENVAT credit or input service distributor distributing CENVAT credit shall retain such certificate for production before the Central Excise Officer on demand.
But Board has found that the reasonable steps as envisaged in the rule are not practical or easy of compliance. So they are considering the proposal to redraft the rule so that the conditions imposed on such purchaser/receiver are practicable and easy of compliance.
A suggestion has been submitted before the Board that instead of amending rule 9(3) to lay down reasonable steps for the purchaser/receiver of taxable goods/ services, rule 9(2) may be amended by placing the responsibility on the purchaser/receiver of taxable goods/services of the input or capital goods or input service in respect of which he has taken the CENVAT credit to ensure that the critical details relating duty or service tax paid or payable, description and value of the goods or taxable service, name and address of the factory or warehouse or provider of input service, and the name of the purchaser/receiver of the goods/taxable service are available on the document on which credit is taken.
Board invites your suggestions –
F.No. -8 Dated: May 23, 2006