Cenvat Credit : Credit allowed of commission agent services, Credit balance cannot be used to pay SBC

CENVAT Credit (Second Amendment) Rules, 2016 : Notification No. 02/2016-CE(N.T.), dated 3-2-2016

G.S.R.—(E).- In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 (1 of 1944) and section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the CENVAT Credit Rules, 2004, namely : –

1. (1) These rules may be called the CENVAT Credit (Second Amendment) Rules, 2016.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the CENVAT Credit Rules, 2004 (here-in-after referred to as the said rules), in rule 2, in clause (l), after sub-clause (C), the following Explanation shall be inserted, namely:-

Explanation.-For the purpose of this clause, sales promotion includes services by way of sale of dutiable goods on commission basis.”.

3. In the said rules, in rule 3, in sub-rule (4), after the sixth proviso, the following proviso shall be inserted, namely: –

“Provided also that the CENVAT credit of any duty specified in sub-rule (1) shall not be utilised for payment of the Swachh Bharat Cess leviable under sub-section (2) of section 119 of the Finance Act, 2015 (20 of 2015):”.

Editor’s Note

  1. In view of insertion of Explanation below rule 2(l)(C) and in view of Circular No. 943/4/2011-CX., dated 29-4-2011 already holding that credit would be allowed of commission agent’s services, it appears that amendment by way of Explanation is clarificatory and must be treated as having retrospective effect.
  2. In absence of restriction in Rule 3(4) of CENVAT Credit Rules, 2004 denying use of credit for payment of SBC, it was opined by some experts that credit balance may be used for payment of SBC. Now, that is specifically barred. It is hoped that department would not take it retrospectively and SBC already paid by using credit balance would be taken to be valid.

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