Cenvat Credit omitted in previous Financial Year

Some of our clients, despite our advise,  were apprehensive of taking Cenvat Credit which was omitted in previous Financial Year. They were also concerned whether it would be appropriate to take such omitted credit when the Balance Sheet has already been finalized.  The justification of taking  previously omitted Cenvat is as under;

Sub-rule (1) of Rule 4 of the Cenvat Credit Rules, 2004 reads as under:-

The Cenvat credit in respect of the inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer a the premises of the provider of output services

Sub-rule (7) of Rule 4 of the Cenvat Credit Rules, 2004 reads as under:-

The CENVAT credit in respect of input service shall be allowed, on or after the day which payment is made of the value of input service and the service tax paid or payable as is indicated in invoice, bill or, as the case may be, challan referred to in rule 9.

 From a plain reading of the above provisions, it is clear that what the Rules prescribes  is that a manufacturer can avail Cenvat credit in respect of certain inputs immediately on their receipt and there is no time limit period prescribed in these rules in this regard. Hon’able Tribunal in the case of M/s. Steel Authority of India Ltd. Vs. CCE, Raipur 213 (287) E.L.T. 321 (Tri. Del.) held that The word may in sub-rule of Rule 4 cannot be read as shall. The Tribunal further expressed its agreement with para 10 of the Board s Circular No.345/2/2000-TRU dated 29.08.2000 which is reproduced below:-

Rule 57 AC provides that Cenvat credit may be taken immediately on receipt of the inputs in the factory. Some apprehensions have been expressed that if the Cenvat credit is not taken immediately, like within 24 hours or so, the field officers may deny the Cenvat credit. The idea is that if the manufacturer desires he can take the Cenvat credit at the earliest opportunity when the inputs are received in the factory. This, however, does not mean, nor is it even intended that if the manufacturer does not take credit as soon as the inputs are received in the factor, he would be denied the benefit of Cenvat credit. Such an interpretation is not tenable.

In another case of CCE, AHMEDABAD Vs. PIERLITA INDIA PVT. LTD. 2011 (273) E.L.T. 535 (Tri. – Ahmd.)  the Hon’able Tribunal came the conclusion that there cannot be any time limit for taking Cenvat Credit. For arriving such conclusion the Tribunal relied upon decision of the Hon’ble Supreme Court in the case of Raghuvar (India) Ltd., whereby the Hon’ble Supreme Court in para 13 observed as under;

 “Any law or stipulation prescribing a period of limitation to do or not to do a thing after the expiry of period so stipulated has the consequence of creation and destruction of rights and, therefore, must be specifically enacted and prescribed there-for – It is not for courts to import any specific period of limitation by implication, where there is really none, though courts may always hold when any such exercise of power hold the effect of disturbing rights of a citizen that it should be exercised within a reasonable period.”

So, in case the Credit was not availed in previous Financial Years, then it may be taken in current FY in consonance with Accounting Standard (AS) 5. Your CA, who finalizes the Balance Sheet, may further elaborate it.

From the above, it may be seen that there is no impediment in taking old Cenvat Credit.