Service Tax credit in case of manufacturing of exempted as well as dutiable product

[Mehul Pandya]

Sir,

We are engaged in manufacturing of edible oil which is exempted from the excise duty.

Our byproduct is dutiable. our manpower supplier is giving combined bill for the whole plant.

Is it possible that if he bill us separately for the manpower working at byproduct section and on the base of it can we eligible for taking cenvat credit ???

Is there any circular or notification is available??

[YAGAY and SUN]

Dear Mehul,

Please check rules 6 of CENVAT Credit Rules, 2004 in this regard.

Regards

YAGAY and SUN

(Management and Indirect Tax Consultants)

[Rajagopalan Ranganathan]

Sir,

Since the inputs and capital goods are common for the manufacture of edible oil and the by product, you have to avail the provisions of rules 6(1) or 6 (2) or 6 (3) of CENVAT Credit Rules, 2004.

Regarding service tax paid for man power supply service, if the supplier of man power provides you separate bills for edible oil section and by product section then you can avail the service tax paid on man power supply service relating to by product section. If he does not provide separate bills then you have follow the procedure prescribed under rules 6(1) or 6 (2) or 6 (3) of CENVAT Credit Rules, 2004.

[Mahir S]

Yes, cenvat credit can be availed for manpower services provided for dutiable byproduct.

Do ensure that the invoice issued by the manpower supplier contain details of the Byproduct for which such services are availed.

[YAGAY and SUN]

Dear Mehul,

You would have to stick to one option only i.e. whatever is being availed by you currently and cannot opt any other option during the financial year. It is why, we suggested you to please go through the Rule 6 of the CENVAT credit rule thoroughly/in details for better understanding.

Please refer explanation-I to sub rule 3 of the Rule 6 of the CENVAT credit Rules in this matter.

Explanation I

If the manufacturer of goods or the provider of output service, avails any of the option under this sub-rule, he shall exercise such option for all exempted goods manufactured by him or, as the case may be, all exempted services provided by him, and such option shall not be withdrawn during the remaining part of the financial year.

Regards,

YAGAY and SUN

(Management and Indirect Tax Consultants)

[Mehul Pandya]

Thanks to you all for your such precious reply.

AI Summary

Cenvat credit for manpower services: credit permitted when services are invoiced to the dutiable byproduct or allocated under Rule 6.
CENVAT credit for manpower services used in a plant producing exempted goods and a dutiable by product is claimable if the supplier issues separate invoices for services to the by product section; absent separate billing, the manufacturer must follow allocation procedures under Rule 6(1)-6(3) of the CENVAT Credit Rules, 2004. An option elected under sub rule (3) applies to all exempted goods and cannot be changed during the remainder of the financial year (Explanation I).