Capital Goods on Rent

[Ashok Chopra]

Respected Forum,

I am registered service provider, procured Machinery and taken credit of CENVAT on capital goods and adjusted against the service tax charged by me from my parties.  Also procured inputs used for the providing output service and taken credit. 

Central excise audit party is of opine that Credit on Input is not allowed to service provider and asking me to debit the credit involved on the inputs.

I have utilized plant and machinery for three years, now i have given entire Land, Building and Plant and Machinery on rent and charging service tax and depositing by Challan.  The present service provider is providing services

Central excise audit party is of opine that i have utilized machinery for three years, hence only 30 percent credit on machinery is allowed to me and balance 70 percent credit i should deposit by Cash, although i am depositing service tax on the rent of that plant and machinery.

Please guide me accordingly and also provide me notification/clarification/circulars etc or any decision of court in the matter.

Thanks and REgards

AI Summary

Service provider disputes CENVAT credit limitations on machinery and inputs after central excise audit; seeks legal guidance. A registered service provider who procured machinery and claimed CENVAT credit on capital goods and inputs is facing an issue with the central excise audit. The audit party argues that credit on inputs is not allowed for service providers and that only 30% credit on machinery is permissible due to three years of usage. The remaining 70% credit should be deposited in cash, despite the service provider charging and depositing service tax on renting out the plant and machinery. The provider seeks guidance and relevant legal references to address the audit's claims.