Provisions in the Cenvat Credit Rules 2004 regarding reversal of credit - Service Tax - 213/3/2019

Circular 213/3/2019 -Service Tax F. No 137/31/2013-Service Tax Government of India Ministry of Finance Department of Revenue Central Board of Indirect Taxes and Customs Service Tax Wing New Delhi, dated 5th July, 2019 All Principal Chief /Chief Commissioners of GST and Central Excise All Principal Directors General/Directors General/ Chief Commissioner AR CESTAT All Principal Commissioners/Commissioners of GST and Central Excise /AR CESTAT All Principal Additional Directors General/Additional Directors General Madam/Sir, Subject: Provisions in the Cenvat Credit Rules 2004 regarding reversal of credit I am directed to draw your attention to the legal provisions regarding reversal of Cenvat credit in the case of services and to analyse some issues which have arisen in this context. 2.0 Issue: Is reversal under rule 6(3) of the Cenvat Credit Rules 2004 additionally required for all the services specified in notification 26/2012-Service Tax dated 20-6-2012? Answer: On a plain and strict interpretation of the provisions, all services mentioned in notification 26/2012-Service Tax dated 20-6-2012 do not, ipso facto, become 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. 3.0 Issue: Is 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 ( i.e. section 66E (i) of the Finance Act, 1994 ) ? Answer: 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 . Yours faithfully (Pallabika Dutta) Joint Commissioner Officer on Special Duty Service Tax Wing Email: [email protected]