Cenvat Credit

This query is : Resolved

Ajay Gumbar (Querist)
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14 November 2007 XYZ Ltd receives an input invoice on which service tax is charged. It bonafide makes the payment of Gross bill value to the vendor.

The vendor duly pays the tax to the credit of Govt. in view of Section 73A

However, later it was found that the service on which such tax was charged was not taxable u/s 65(105).

Now will XYZ Ltd be entitled to availed the Cenvat credit of Service tax which it has paid bonafide and which is already deposited with the Govt as Service Tax.

Ajay

Dayal

Dayal (Expert)
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14 November 2007 Yes

Unless the service provider intends to seek refund and you provide them with an undertaking that credit has not been availed or has been reversed.

In this case the vendor has to give you a credit note for the same.

In case he does not want to claim refund then XYZ can very well take the credit of service tax as the same has been deposited with the Govt.

Ajay Gumbar

Ajay Gumbar (Querist)
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14 November 2007 Hi Dayal,

Rule 3(1) of Cenvat Credit Rules 2004 mentions the cases where an assessee can avail Cenvat Credit. This list is exhaustive. This means any assessee can avail credit of only those taxes/duties/cess which are mentioned in Rule 3 (1)

Subclause (ix) of that rule specifies "service tax leviable under section 66 of the Finance Act"

This means an assessee can take credit of only those services which are mentioned in 66 (which of course give reference to 65(105))

Looking back to your reply, since the service on which tax was charged and paid is not mentioned u/s 65(105), how could we take the credit of such service tax.

Please give statutory reference to your reply.

Thanks

Ajay Gumbar.

Raj

Raj (Expert)
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15 November 2007 Hi
In my opinion the company can claim refund in this regard with in one year period.

Ajay Gumbar

Ajay Gumbar (Querist)
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15 November 2007 Hi Raj,

Thats easy way to say but never an easy thing to do.

Dayal, Please reply on the Cenvat Credit claiming part with statutory / case law reference.

Ajay

Dayal

Dayal (Expert)
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15 November 2007 Dear Ajay

The service provider is registered under the Act
He has valid registration Number
He has collected the Taxes and deposited with the treasury

Any amount paid to the exchequer is available as credit even if erroneously paid

There is no revenue loss if credit is availed

If the Service provider applies for refund it would be treated as unjust enrichment, unless you provide a certificate that credit has not been availed and credit note to that affect has been given to you by the service provider.

If you do not intend to challenge the eligibility, then you may deduct the service tax amount from the providers bill and pay the balance amount and advise the service provider to file a refund claim.

Unless the authorities challenge the service as not being a notified service, credit eligibility will hold good in the eyes of law.

However if you can state the nature of service, which you believe is not taxable, the debate can be more fruitful.

Ajay Gumbar

Ajay Gumbar (Querist)
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15 November 2007 Thanks Dayal,

I am satisfied.

Ajay.

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