Clarification Regarding Availment of CENVAT Credit of Tax Dues Paid Under VCES, 2013

A clarification was sought as to whether the first installment of tax dues paid (Minimum 50 percent of tax dues) under the Service Tax Voluntary Compliance Encouragement Scheme, 2013 (“VCES” or “the Scheme”) would be available as Cenvat Credit immediately after payment or only after payment of tax dues in full and receipt of acknowledgement of discharge certificate in form VCES-3. 

Background: 

The Stated question was clarified in the past under Question No. 22 in FAQs on VCES issued by CBEC as under: 

(a) Whether the tax dues amount paid under VCES would be eligible as CENVAT credit to the recipient of service under a supplementary invoice? 

(b) Whether CENVAT credit would be admissible to the person who pays tax dues under VCES as service recipient under reverse charge mechanism? 

Clarification: 

Rule 6(2) of the Service Tax Voluntary Compliance Encouragement Rules, 2013 (“the VCES Rules”), prescribes that CENVAT credit cannot be utilized for payment of tax dues under the Scheme. Except this condition, all issues relating to admissibility of CENVAT credit are to be determined in terms of the provisions of the CENVAT Credit Rules.

As regards admissibility of CENVAT credit in situations covered under part (a) and (b), attention is invited to Rule 9(1)(bb) and 9(1)(e) respectively of the CENVAT Credit Rules. 

Now, Another Clarification Issued With Rider: 

The CBEC has issued Circular No. 176/2/2014-ST dated January 20, 2014 (“the Circular”) clarifying that:

• Cenvat credit shall only be available after payment of entire service tax dues and obtaining discharge certificate in Form VCES-3 since the declaration made under the Scheme becomes conclusive only on issuance of acknowledgement of discharge under Section 107(7) of the Finance Act, 2013.

• Further, the Circular has also directed the Chief Commissioners to issue Form VCES-3 within stipulated period of seven working days from the date of furnishing the details of payment of tax dues along with interest (if any) by the declarant as provided under Rule 7 of the VCES Rules. 

Hope the information will assist you in your Professional endeavors.