Credit of service tax

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Purav (Querist)
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28 January 2012 Kindly let me know whether service tax credit can be availed by the company or not in the case below. The facts are as under:

A manufacturing company has place of removal as its factory gate. It sells their product to the dealer. The dealer sells this product to the customers. The company has an agreement with a bank that the bank will lend finance to the customers who would like to buy it. In return, company would pay Rs. 1000/- per product financed by the bank. This is called Subvention Charges by bank. The applies service tax @ 10.3% on this subvention charges & the same is paid by the manufacturing company to the bank.

Now, the question here is whether the manufacturing company can avail Cenvat Credit on the Service tax on Subvention charges paid by it to bank.

CA Nikhil Jhanwar

CA Nikhil Jhanwar (Expert)
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28 January 2012 I think credit should not be allowed because service received by company has no relation with manufacture of product but only in relation to sale of product and it has been received after place of removal.....

Further replies are sought....query is being stated as open....

Purav

Purav (Querist)
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29 January 2012 Whether this Subvention charges be considered & related to marketing of the product of the manufacturing company. And as per new definition of Input Service sales promotion expenses & marketing expenses are eligible for Cenvat Credit.

Purav

Purav (Querist)
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29 January 2012 Further in lines to my previous query, I would like to ask one one query on the similar grounds.
The manufacturing company which has its place of removal as factory gate, also provides 2 years warranty for its product. This 2 years warranty is divided in two parts. For first 8 months it is manufacturers warranty & for remaining 16 months the manufacturer only provides warranty but they have taken insurance to cover the risk of that. This they call is extended warranty for 16 months.

Now my question here is, whether the Cenvat Credit of Service tax paid on the Insurance Premium to cover the risk of extended warranty can be availed? Can it be related to marketing or sales promotion of the product?

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