08 December 2007
Suppose, an entity (service receiver) pays service tax on goods trasport by road by availing 75% abatement. Now, can it avail CENVAT credit of this service tax paid ? Answer by refering the provisions of law. I think it can be availed.
There is no hindrance for an assessee in availing CENVAT credit if it pays ST on GTA service payments. Such payment is made in the capacity of service receiver only due to deeming provision u/r 2 (1) (d) (v) of ST Rules 1994.
It is the service provider availing abatement who is prevented from taking credit of CENVAT on input services in relation to 'such' (abatement availed) services.
11 December 2007
Analysis of the provision of the Service tax act with respect to Cenvat Credit
A. Whether credit of such service tax paid on outward freight is eligible for Cenvat Credit COMMENTS: This issue has been examined in great detail by the CESTAT in the cases of M/s Gujarat Ambuja Cements Ltd. vs CCE, Ludhiana [2007 (006)STR 0249 Tri-D],. In this case CESTAT has held as follows, “the post sale transport of manufactured goods is not an input for the manufacturer/consignor. The two clauses in the definition of ‘input services’ take care to circumscribe input credit by stating that service used in relation to the clearance from the place of removal and service used for outward transportation upto the place of removal are to be treated as input service. The first clause does not mention transport service in particular. The second clause restricts transport service credit upto the place of removal. When these two clauses are read together, it becomes clear that transport service credit cannot go beyond transport upto the place of removal. The two clauses, one dealing with general provision and other dealing with a specific item, are not to be read disjunctively as to bring about conflict to defeat the laws scheme. The purpose of interpretation is to find harmony and reconciliation among the various provisions”. In conclusion a manufacturer / consignor can take credit on the service tax paid on out ward transport of goods up to the place of removal and not beyond that The phrase ‘place of removal’ is defined under section 4 of the Central Excise Act, 1944. It states that,- “place of removal” means- (i) a factory or any other place or premises of production or manufacture of the excisable goods ; (ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be stored without payment of duty ; (iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory; from where such goods are removed.”
It is therefore, clear that to a manufacturer/consignor the eligibility for availment of credit on the service tax paid on the transportation, the factual situation (whether a factory gate sale, sale from a non-duty paid warehouse, depot sale or sale from any other place or premises from where the excisable goods are to be sold after their clearance from the factory) would determine the extent of such eligibility
22 December 2007
The service receiver can avail the benefit of the Notification 1/2006 where he can avail the 75% abatement towards frieght charges. But he cannot adjust input cenvat credit agauinst the service tax payable on 25% of the frieght charges. The service tax paid on 25% of the frieght charges can be adjusted against the excise duty or output service tax payable.
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