We are manufacturers of Cement and we are engaging Motor vehicles i.e. payloader, exclavtor, tippers & dumppers for internal movement of raw materials on hire basis.
We are paying hiring charges with service tax charged by service provider.
In the above situation, can we avail input service credit as manufacturer of cement products.
plz clarify with relavent rule position & as per Law.
16 April 2013
Sir, as per the defination 2(l) of Inout service given under CCR,2004. in clause B of 2(l) it is written that, services provided by way of renting of a motor vehicle(newly amended in FINANCE ACT 2012) in so far as they relate to a MOTOR VEHICLE are specifically excludes from getting the CCR, except when used for providing few services (which is not the case with your concern). hence reading this clarifies that the vehicles you written are not allowed for input. (only could be allowed if they are not under definition of motor vehicles, which according to me they are.) hence in my view not allowed as specifically prohibited by the revenue, in definition 2(l) of CCR,2004.
Credit is not allowed if the motor vehicles are not capital goods. In this case, payloader, exclavators & earth moving equipment etc., are falling under capital goods defination and chapter heading no. 87042390.
hence, we are eligible for input service credit under clause B of 2(i) of CCR.
17 April 2013
no that is the case when the motor vehicle is capital good for your company and that is only possible when you purchase it. then that comes in 2(a) of ccr. but when you taking it on hire, basically you taking service and for that you have to check rule 2(l), which i mentioned above.
you mentioned in your query that you taking it on hire. so for hiring something no need to check the definition of capital goods as these are not capital goods for your company and there is no excise on the bill. if there is excise on the bill(that is the case when you purchased the asset), then only you can take the credit after checking that it falls in the definition not
17 April 2013
The exclusion clause specified that the services provided by way of renting of motor vehicle, in sofar as they relate to a motor vehicle which is not a capital goods;
the input credit is not allowed on hiring charges to service provider not to service receiver. In main limb of CCR, any service used by manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products the input service credit is allowed. In our case the services used is part of manufacturing of cement process without this we can not manufacture of final product.
17 April 2013
the whole definition is for both i.e, for manufacturer and service provider, though it has to be understood in the sense which is possible for the specific person. you are correct that you are using the service for production of your final product and should be included as per the MEANS part of the definition, but when the definition specifically excludes something we can not take the view that this is not written for manufacturer. actually the department do not intend to give credit of any motor vehicle, whether you take is as your 'input' or any service related to motor vehicle as 'input service'
according to my understanding, it is specifically disallowed, but suggestions of other experts may also be taken.
In case if the service provider is registered under works contract services
and whether he can avail cenvat credit in respect of hire charges of crane and excavators which are used for transportation of material( thereby used for providing output services)
My analogy is that if the said crane or excavators are purchase by compnay becomes capital goods . Hence eligible for cenvat credit.
Please let me know if there are any clarfication/circular from the department in this regard.
CAclubindia
