CENVAT Credit on Spare Parts used for Repairs

[Abhijit Dongaonkar]

Service Provider, who is having authroised Service station for car manufactuers. He is engaged into the business of  Sales of spares & Servicing of Vehicles in his service station. During the cource of Service of Vehicle/ Repairs of vehciles he also sales/uses  spares parts purchased from manufactuer. Service Provider invocie for Spares and Service charges separately to his customer. Now I have following queries:

 

1. Since the spares purchased are used in Services/Repairs of the vehicle, whether he will be able to take credit of Excise Duty paid on spare parts purchased by him from manufactuers ?

2. Now, the Trading is forming part of negative list, whether in this condition he would be to take proportinate credit of Excise duty paid on sapres purchased?

Please advice on above issue.

[sanjeev bajaj]

Mr. Abhijit,

I was waiting for some opinion on this query, but not heard from any body. I am giving my opinion and would like to have discussion on the same from readers:-

1. Whether it is works contract or not. You are invoicing separately for spares and services although under same contract.

2. If it is works contract,  then no credit on inputs will be available.

3. However, the credit for capital goods and input services are available.

4. To determine whether it falls under the definition of capital goods, you have to refer the definition of capital goods under clause (a) of Rule 2 of Cenvat Credit Rule

5. In my opinion, if it is personal car for self usage, then it does not fall under the head capital goods. However, you have to refer the Excise Tarrif Act and the definition.

[Abhijit Dongaonkar]

I look to it with following prospective:

1. It is basically repairs and maintaince contract, although some portain, like denting and painting activity will form part of works contract, otherwise no wct involved.

2. Trading activity is supportive the servicing activity.

3. Since trading form part of negative list, one can avail proportinate credit on spares parts purchased from manufactuere and sold to customer as part of trading activity.

 

Regards

[sanjeev bajaj]

No credit for input used in the provision of exempted services is allowable(Rule 6 of Cenvat Credit Rule)

Trading Activity is exempted services. Please refer clause (e) of Rule 2 of Cenvat Credit Rules read with sec 66B and sec 66D of the Finance Act, 1994.

Hence, no credit of input towards trading activity. Thus, in some cases, where the item falls under the category of capital goods and used in providing of services, the credit will be allowed.

AI Summary

Cenvat credit eligibility depends on whether spare parts are used in taxable service or in exempted trading, affecting credit claims. Cenvat credit on spare parts for a service station depends on activity character and attribution: inputs used for exempted services (including trading treated as an exempted service) are barred from credit under Rule 6, whereas credit for capital goods and input services is available if those items meet the statutory definitions and are used in taxable activity; separate invoicing and whether the transaction is a works contract affect eligibility.