Excise Duty on Capital Goods

[Ashok Chopra]

Respected Forum,

1.    I am 100 percent EOU at place A.  as manufacturer and also Powder Coating Unit at Place B. as  Service Provider

2.   My service tax registration is one, both the places are shown in Registration and Nature of Services mention as GTA for manufacturing Unit.   And for Powder Coating Nature of Service is mentioned as Business Auxillary Service.

3. I am filing one Service Tax Return and Balance Sheet is one.

4. After getting my unit of Powder Coating registered in Service Tax as B.A.S , I have taken credit of CENVAT on capital goods for Powder Coating Machinery.

5. I was receiving auto parts from various vendors and sending back duly powder coating (powder i was purchasing from market and also taking CENVAT credit on the purchase of powder.

6. I charged service tax from the parties approximately two years and stopped in July, 2013 as i was asked by our vendor that they are charging excise duty from their OEM on the product being Powder Coated by me.

7. Now i have given entire plant and machinery, land and building  on rent to some one else.

My queries:-

1. I am being  asked by Central Excise Officer during audit of my EOU unit that my Powder Coated Plant is not registered with Central Excise and registered in Service Tax Only, Wrong credit of CENVAT has been taken by me on Plant and Machinery and Purchase of Powder.

2. He is also asking Powder Coating is not my JOB Work Income, it will be considered as manufacturing.

I shall be thankful, if any one will guide me accordingly and will provide me supporting notification/clarification/circulars to show to my management.  He is insisting me to deposit the CENVAT credit taken by me in CASH.   What should i do?.  Please guide me accordingly.

Thanks and regards

AI Summary

Cenvat credit entitlement for powder-coating job workers where service tax is paid and inputs move under excise challan.
Entitlement to take Cenvat credit on inputs and capital goods used in powder-coating arises where the activity is taxed as a service and the provider has discharged service tax; if incoming parts are received under excise challan and covered by the inter-factory exemption notification, the processor is a job worker and excise does not attach in the job worker's hands, supporting the Cenvat credit claim; absent such movement documentation the process may be treated as manufacture and attract excise, risking credit recovery.