RECENT AMENDMENTS IN CENVAT CREDIT PROVISIONS - PART-II

[Dr. Sanjiv Agarwal]

Recovery of Cenvat Credit under Rule 14 (Amendment w.e.f. 1.3.2015)

Vide Notification No. 6/2015-CE(NT) dated 1.3.2015, Rule 14 has been substituted w.e.f. 1.3.2015 as follows –

“14. Recovery of CENVAT credit wrongly taken or erroneously refunded. –

(1) (i) Where the CENVAT credit has been taken wrongly but not utilised, the same shall be recovered from the manufacturer or the provider of output service, as the case may be, and the provisions of section 11A of the Excise Act or section 73 of the Finance Act, 1994 (32 of 1994), as the case may be, shall apply mutatis mutandis for effecting such recoveries;

(ii) Where the CENVAT credit has been taken and utilised wrongly or has been erroneously refunded, the same shall be recovered along with interest from the manufacturer or the provider of output service, as the case may be, and the provisions of sections 11A and 11AA of the Excise Act or sections 73 and 75 of the Finance Act, 1994, as the case may be, shall apply mutatis mutandis for effecting such recoveries.

(2) For the purposes of sub-rule (1), all credits taken during a month shall be deemed to have been taken on the last day of the month and the utilisation thereof shall be deemed to have occurred in the following manner, namely: -

(i) the opening balance of the month has been utilised first;

(ii) credit admissible in terms of these rules taken during the month has been utilised next;

(iii) credit inadmissible in terms of these rules taken during the month has been utilised thereafter.”

New Rule 14 provides for recovery of Cenvat credit taken but not utilized and prescribes the manner of determining utilization of credit. W.e.f. 1.3.2015, Central Government shall also recover Cenvat credit which is only wrongly taken and not utilized. Recovery can be thus made in the following situations –

1. Cenvat Credit taken wrongly but not utilized.
2. Cenvat Credit wrongly taken and utilized.
3. Cenvat Credit erroneously refunded.

Recovery shall be made in the following manner –

Action	Recovery of	Recovery from	How
For Cenvat credit wrongly taken but not utilized	Amount of credit taken	Manufacturer	Section 11A of Central Excise Act, 1944
		Output service provider	Section 73 of Finance Act, 1944
For Cenvat credit taken and utilized wrongly	Amount of credit and interest	Manufacturer	Section 11A and 11AA of Central Excise Act, 1944
		Output service provider	Section 73 and 75 of Finance Act, 1944
For Cenvat credit which has been erroneously refunded	Amount of refund and interest	Manufacturer	Section 11A and 11AA of Central Excise Act, 1944
		Output service provider	Section 73 and 75 of Finance Act, 1994.

In Rule 14, it has been provided that all credits taken during a month shall be deemed to have been taken on the last day of the month and the utilisation thereof shall be deemed to have occurred in the following manner, namely: - (i) the opening balance of the month has been utilised first; (ii) credit admissible in terms of these rules taken during the month has been utilised next; (iii) credit inadmissible in terms of these rules taken during the month has been utilised thereafter, i.e. in the following order –

• first from opening balance
• then from admissible credit used during the month
• lastly from inadmissible credit used during the month