Cenvat Credit bank charges on Export Realization

[Ashwani Rustagi]

Can we take Cenvat Credit of service tax charged by bank on its charges on export realization and conversion of foreign currencies in INR. Viewers point solicited.

[MUKUND THAKKAR]

sir,

cenvat credit is allowable any bank charges which has connected to your business activity.

[Rajagopalan Ranganathan]

Dear Shri. Rustagi,

Rule 2 (l) of CENVAT Credit Rules, 2004 defines "input services" which states that-

(l) “input service” means any service, -

(i) used by a provider of output service for providing an output service; or

(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal,

and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation up to the place of removal;

In my opinion charges paid by you to the Bank on export realization and conversion of foreign currencies in INR are certainly attributable to you Business activity/promotion. Therefore service tax paid by you on such charges is eligible for credit. However, on the safer side it is better to get it clarified by the Department through Regional Advisory Committee.

[YAGAY and SUN]

Dear Ashwani,

These services are attributable to post export activities and are not input services. Either you would have to take refund under notification no. 41/2012-ST/29-06-2012 mentioning it on S/B or get it actual through submitting the prescribed documents in this notification.

Regards,

Neelam Taneja, (Executive Consultant)

YAGAY and SUN (Management, Business and Indirect Tax Consultants)

[YAGAY and SUN]

Dear Ashwani,

Long back, the phrase "Business Activities" had been deleted from the definition of Input Services. Hence, Credit would not be allowable. Further, in export case, place of removal is port. But these activities are beyond the place of removal. Hence, on this very aspect the availment of CENVAT credit is doubtful.

Regards,

Neelam Taneja, (Executive Consultant)

YAGAY and SUN (Management, Business and Indirect Tax Consultants)

[PAWAN KUMAR]

Dear Sir,

Cenvat credit is eligible on bank charges as per the rule 2(l) of Cenvat Credit Rules, 2004.

[Ashwani Rustagi]

Thanks to all for advice.

I agree with Mr. Rajagopalan as per Rule 2 (l) of CENVAT Credit Rules, 2004 defines "input services" provides some inclusive services used in relation to modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation up to the place of removal though these are not directly or indirectly used in relation to the manufacture of final products.

Viewers further comments solicited.

Regards,

Ashwani Rustagi

[Mahir S]

Sir, Rule 2(l)(ii) of Cenvat Credit Rules, 2004, defines the eligible category of Services for availing credit, according to which services should have been used directly or indirectly in the manufacture or clearance of their final products. Thus, it is apparent that there should be a nexus between the ‘input service’ and the activity of ‘manufacture’. In the instant case, there is no nexus between the Foreign Bank’s activities and the manufacturing activities.

Further, it is obvious that these services were utilized after removal of the goods from the factory. Thus, these services have not been used by the assessee, directly or indirectly, in or in relation to the manufacture of final products or clearance of final products from/upto the place of removal.

In view of above, input service credit does not appear to be admissible in above case.

Dear sir,

I have read all the comments and agree that the credit can be availed on export realization charged by the bank.

The credit can be availed on the bank advice wherein all the details of TAX & Service Receiver is mentioned.

The issue arising is that the address mentioned on the bank advice is of HO and not of the manufacturing unit. the manufacturing unit is holding a separate central excise & ST registration on the address of factory premises.

Now in the above case is it possible for the unit to avail & utilize the credit where the address of HO is mentioned instead of manufacturing unit.

Thank You

AI Summary

Cenvat credit on bank charges: admissibility turns on nexus with manufacture/clearance and timing relative to place of removal.
Cenvat credit on bank service tax for export realization and currency conversion hinges on whether such charges qualify as an input service used in or in relation to manufacture or clearance; proponents rely on Rule 2(l)'s inclusive list to allow credit with supporting documentation, while opponents emphasise the requisite nexus and that services rendered after the place of removal may be post export and ineligible, making refund under the export notification an alternative; address mismatches on bank advices pose practical compliance concerns.