Cenvat credit on construction bill

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

17 April 2014 Good Evening All,

I need ur help regarding..one of our contractor worked in civil and mechanical works submitted bill after 4 years (S.Tax 10.36%). We already paid bill amt as advance deducted TDS. We are kraft paper manufacturing unit. Now i want to know can we avail above S.tax cenvat input?

Kindly help me in this regard..

Thanks in Advance
M.RamKumar
99498 40959
Rajahmundry

Querist : Anonymous

Querist : Anonymous (Querist)

22 April 2014 Dear All..Kindly give reply...

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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19 July 2024 In order to determine whether you can avail CENVAT credit on the service tax paid on the construction bill submitted by your contractor, let's consider the general principles under the CENVAT Credit Rules, 2004:

### Eligibility Criteria for CENVAT Credit:

1. **Input Service Definition**: According to Rule 2(l) of the CENVAT Credit Rules, 2004, "input service" means any service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal.

2. **Construction Services**: Construction services, including civil and mechanical works, can qualify as input services if they are used directly or indirectly in relation to the manufacturing activity or factory premises.

3. **Time of Availment**: Generally, CENVAT credit can be availed upon receipt of the taxable service and payment of service tax to the service provider. However, there are provisions to avail credit even before payment of the service tax, subject to certain conditions.

### Specific Considerations for Construction Services:

- **Delayed Invoicing**: The fact that the bill was submitted after 4 years does not necessarily preclude you from availing CENVAT credit, provided that the services were received and utilized during the course of your manufacturing operations.

- **Documentary Requirements**: You must possess valid invoices from the contractor indicating the service tax component paid. This invoice should clearly state the nature of services provided and their utilization in your manufacturing process or factory premises.

- **Nature of Use**: Ensure that the construction services were indeed used directly or indirectly in the manufacture of your final products or in relation to your factory premises. This could include civil works related to plant construction, maintenance, or improvement.

### TDS and Advance Payments:

- **TDS Deduction**: The fact that TDS (Tax Deducted at Source) was deducted indicates that the contractor's service was subject to TDS provisions under the Income Tax Act. It doesn't affect your ability to claim CENVAT credit on the service tax component of the invoice.

- **Advance Payments**: Advance payments made before the submission of the bill and deduction of TDS do not impact your eligibility for CENVAT credit. What matters is the actual receipt of services and payment of service tax.

### Conclusion:

Given these points, assuming all other conditions are met (such as proper documentation and the nature of service usage), you should be eligible to claim CENVAT credit on the service tax paid for the construction services provided by your contractor. It's advisable to consult with a tax expert or your chartered accountant to ensure compliance with all relevant regulations and optimize your tax efficiencies effectively.

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