Service Tax Credit

[Abdul Razack Basha]

Dear Sirs,

Please advise for Service Tax credit eligibility against Canteen Contract Payment and Employee Transport Bill. We are receiving Invoice from the 1) Canteen Contractor and they are charging Service Tax on 60 percent of the value, is it eligible for Credit and 2. Employee transport, we are paying service tax as per recipient rule 40 percent of the value ie. 4.944 percent , is it eligible for Service tax credit. Please clarify.

Thanks & Regards

B. Abdul Razack

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[Rajagopalan Ranganathan]

Sir,

  1. Under rule 2 (l) (C) of CENVAT Credit Rules, 2004 out door catering is excluded from the definition of input services.  Hence you are not eligible to avail credit of service tax paid on canteen contract payment.

2. Regarding service tax paid on employees transport bill, under rule 2 (l) (B) of CENVAT Credit Rules, 2004 service provided by way of renting of motor vehicle in so far as they relate to a motor vehicle which is not a capital goods

3.  under rule 2 (B) & (C) of CENVAT Credit Rules, 2004 Motor vehicles are treated as capital goods only when the said motor vehicle including the chassis is registered in the name of  of the service provider and when used for providing -

 (i) providing output service of renting of such motor vehicle; or

(ii) transportation of inputs and capital goods used for providing output services; or

(iii) providing an output service of courier agency; or

(iv) transportation of passengers; or

(v) renting of such motor vehicle; or

(vi) imparting motor driving skills.

Since transporting employees from their dwelling place to factory and back cannot be treated as transportation of passenger you are not eligible to avail the credit.

[Abdul Razack Basha]

Dear Sir,

Thank your for your advise and immediate reply but i am not clear about transporter bill service tax. We are having contract with Rangan Travels for transportation of our employees. They are raising Invoices without charging service tax, but we are paying as per recipient rule at the rate of 4.944 percent this amount can we take credit, please clarify sir.

Thanks & Regards

Abdul Razack

[Abdul Razack Basha]

Thank you very much

[Guest]

Dear Sir,

As per Rule 2 of Cenvat Credit Rules 2004 you are not eligible for credit on motor vehicle and canteen facility.

Please read Rule 2 (k) and (i) of Cenvat Credit Rules 2004

[phaniraju konidena]

My dear Abdul Razack Basha,

As decided by the Hon'ble Karnataka High Court in the case of CCE, Bangalore Vs Stanzen Toyotetsu India (P) Ltd.  (2011 (4) TMI 201 - KARNATAKA HIGH COURT) and CCE Vs ACE Designers Ltd.  (2011 (4) TMI 1071 - KARNATAKA HIGH COURT) by extending the benefit of CENVAT credit in respect of service tax paid by an outdoor caterer, the Bench set aside the order-in-appeal and allowed the appeal with consequential relief.

With regards,

K.PHANI RAJU

[phaniraju konidena]

Dear Mr.Abdul Razack,

In the case of EMCON Technologies India (P) Ltd., Vs.CCE, the South Zonal Bench of Bangalore has held that Rule 2(1) of the Cenvat Credit rules, 2004 - Cenvat Credit - Input Service - Rent-a-Cab Service' used by company for transporting their employees between factory and their residential locations has nexus with manufacture of excisable goods in factory and is eligible as input service. Hence, you can fight with the department for your right to avail the cenvat credit.

AI Summary

Service tax credit eligibility limited by CENVAT exclusions, though some courts permit credit for canteen and employee transport. Statutory exclusions under Rule 2(1)(C) of the CENVAT Credit Rules, 2004 exclude outdoor catering from the definition of input service and bar credit for canteen contract payments. Renting of motor vehicles is eligible only when the vehicle is registered in the provider's name and used for specified output services; transporting employees from home to factory ordinarily does not qualify as transportation of passengers for credit. Some judicial decisions have nevertheless allowed credit where a sufficient nexus with manufacture or taxable output services is established.