The Central Board of Indirect Taxes and Customs ( CBIC ) has issued a clarification on the provisions in the Cenvat Credit Rules 2004 regarding reversal of credit.
In the Circular issued by in Q & A format said that, regarding the reversal under rule 6 (3) of the Cenvat Credit Rules 2004, on a plain and strict interpretation of the provision, all services mentioned in notification 26/2012-Service Tax dated 20-06-2012 do not, ipso facto, becomes “exempted services”. They will become so only if they satisfy the twin conditions specified in Section 2 (e) of the Cenvat Credit Rules, 2004 i.e. there is a restriction on both inputs and input services.
The CBIC also addressed the question, Whether reversal under rule 6(3) of the Cenvat Credit Rules 2004 additionally required when providing the “Service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as part of the activity”?
The department clarified that, on a plain and strict interpretation of the wording of the relevant provisions, other than the restrictions in rule 2C of the Service Tax ( Determination of Value) Rules 2006, there is no need for any further reversal of credit under rule 6 (3) of the Cenvat Credit Rules 2004.
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