GTA & CONSULTING ENGINNERS PAYMENT ADJUSTMENT AGAINST CENVAT

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satishkumar repaka

MANAGER COMMERCIAL

25 Points Joined April 2010

WE ARE REGISTERED OUR MFG UNIT UNDER CATAGORY OF GTA AND CONSULTING ENGINEERS. FROM THE PERIOD 2004-2005, 2005-2006, 2006-2007 TILL DATE THERE WAS AN ACCUMULATED IN PUT SERVICE CREDIT AVAILABLE IN OUR RECORDS WHICH WE AVAILED FROM SECURITY CHARGES, TESTING CHARGES, SERVICE CHARGES ON MAN POWER PROVIDING FOR MANUFACTURING OF PRODUCTS, SERVICE TAX ON PERFOMANCE BANK GURANTEE CHARGES, TELEPHONE CHARGES ETC.,

THE DAY ONE CONSULTING ENGINEERS SERVICE TAX PAYMENT WE ARE ADJUSTING WITH IN PUT SERVICE TAX CENVAT CREDIT.

GTA ( INPUT SERVICE AND OUT PUR SERVICE) SERVICE TAX PAYMENT AFTER AVAING ABATEMENT F0R THE PERIOD 2004-2005, 2005-2006, 2006-2007 WE HAVE ADJUSTED WITH IN PUT SERVICE TAX CENVAT CREDIT ONLY. BUT SINCE THEN THIS PAYMENT WE ARE PAYING THROUGH CASH ONLY.

BUT RECENT SERVICE TAX AUDIT THEY HAVE OBJECTED THESE TWO POINTS AND SAID THAT CONSULTING ENGINNERS PAYMENT AND GTA PAYMENT CANNOT BE ADJUSTED WITH INPUT SERVICE TAX CENVAT CREDIT AND ISSUED SHOW CAUSE NOTICE.

IS IT DEPARTMENT SHOW CAUSE NOTICE IS CORRECT?

PLEASE COMMENT ON ABOVE IF POSS WITH NOTIFN ANY.

WITH BEST WISHES

SATISH KUMAR REPAKA

Replies (2)

Dhruv

Chartered Accountant

308 Points Joined October 2008

Ideally, for Cenvat Credit on Inputs which is availed by the concern, the set off against output services is only possible if the activity on which input credit has been availed substantially contributes and is an essential part of the output activity.

In your case , am assuming, they've sent a show cause notice on the basis of the fact that the services on which input credit has been taken are not directly in consonance with the output service (GTA and Consulting Engineer) . Had you taken input credit on say excise paid on trucks bought for providing goods transport services, then in that case, you could have availed the setoff owing to the fact that the input activity is related to output.

This is just a contention, the text of the show cause notice however is more important in forming a view as to why the department is not allowing you to take input credit.

satishkumar repaka

MANAGER COMMERCIAL

25 Points Joined April 2010

Dear Sir

FROM THE ACCUMULATED SERVICE TAX CENVAT CREDIT BALANCE ONLY( FOR THE PERIODS 2004-2005,2005-2006-2007,2007-2008) TILL TODAY WE ARE ADJUSTING CONSULTING ENGINEERS PAYMENT. GTA SERVICE TAX PAYMENT AFTER ABATEMENT ADJUSTED THROUGH SERVICE TAX CENVAT CREDIT UPTO 2007-2008 ONLY. FROM APRIL 2008 ONWARDS PAYING BY CASH. FROM APRIL 2008 WARDS ALL SERVICE TAX CENVAT WE ARE USING ONLY FOR EXCISE DUTY PAYMENT ON FINISHED GOODS.

Please tell dept. SCN correct or not?

Satish