Cenvat credit

Queries 839 views 3 replies

Sahil Sharma

accountant

102 Points Joined February 2012

One of my friend, who is a service tax assessee, purchased two new excavators on which he has paid excise duty in F.Y.11-12, he provides the site preparation and clearance service on a contractual basis out of only one of its excavators, however second one is not put to use in F.Y.2011-12 and he collects service tax from the service receipient, now the same has to be deposited to the revenue, my query is that can he avail the cenvat credit on the purchase of both the new excavators, which is his main source of providing service, against the service tax liability? If answer is yes then please suggest the manner in which the credit is to be taken i.e. as an input - 100% or as capital goods - 50% (although it is used as an input, my guess is 50% since it is a capital good (also can be confirmed by its tariff heading))?

Replies (3)

madhur

Service

31 Points Joined June 2011

the excavators are covered in defination of capital goods (Chapter 84, heading 8429). so there is no question of 100% availment of credit.

Further the credit of both the excavators can be allowed as it is mentioned in basic scheme of cenvat that the 50% of credit of capital goods can be availed in year of acquisition.

Sahil Sharma

accountant

102 Points Joined February 2012

thanks madhur however i think you are correct for the 1st part but for the second i do have a doubt i.e. regarding credit of cenvat can be taken in the year of acquistion?? As per definition of Cap. Goods u/r 2 of Cenvat Credit Rules, 2004, Capital Goods must be used in the factory of the manufacturer of the final products or it must be used for providing the output service. But in our case one of the excavator which has not been put to use or is not used for providing any output service, whether exempted or non-exempted, is not a capital good at all as per the abovementioned definition and that itself rescind the question of availing the cenvat credit on such goods.