List of services Eligible for CENVAT Credit

[Rudrayani Shedjale]

Hi

We are the manufacturer of API(Active Pharma Ingredient). we file the ER1 returns.

previously we have taken credit of entire service tax borne by us.

Services includes as :-

• Security(at factory premises),
• [Custom Clearance ,Transport,Terminal Handling Charges,ADC charges- these are provided by our CHA]
• Material Testing
• Pest Control(at factory premises)
• Commission(for assisting into sales)
• Courier (for sending samples/documents abroad)
• Labour Charges
• Validation & Calibration.

Can the expert advise whether all the above mentioned services are eligible for taking CENVAT credit??

[Rajagopalan Ranganathan]

Madam,

All the services listed by you except commission for assisting into sales are input services and you are eligible to avail the credit of service tax paid on those services as credit. As far as Commission paid to assist in sales will be treated as sales promotion service. However there are two contrary judgments, one of Gujarat High court and another of Punjab and Haryana High Court. While Gujarat High court has held that Commission Agent Service is not input service in the case of CCE vs. Cadila Healthcare 2013 (1) TMI 304 - GUJARAT HIGH COURT= [2013 (30) STR 3 (Guj. H.C.)] but Punjab and Haryana High Court has held in the case of CCE vs, Ambika Overseas 2011 (7) TMI 980 - PUNJAB & HARYANA HIGH COURT=[2012 (25) S.T.R. 348 (P & H)] = the same is eligible for credit. If you are outside the jurisdiction of both the High Courts you can agitate the issue afresh for decision. However the Department will follow the Gujarat High Courts decision since it is in their favour.

[Rudrayani Shedjale]

But sir, excise officer has asked us we are not eligible for taking cenvat credit of services provided by CHA,courier & commission.Rest are okay.Please explain.

[Rajagopalan Ranganathan]

Madam,

As per Point 5 of CBEC's Circular 943/04/2011-CX dated 29.4.2011 "the definition of input services allows all credit on services used for clearance of final products up to the place of removal. Moreover activity of sale promotion is specifically allowed and on many occasions the remuneration for same is linked to actual sale. Reading the provisions harmoniously it is clarified that credit is admissible on the services of sale of dutiable goods on commission basis."

In respect of Courier Service and Customs House Agent Service there are a lot of dcisions of CESTAT allowing the credit. Therefore you inform the Department that you are eligible to take credit and if the Department has any objection let them issue showcause notice and you can deal with it with the assistance of a consultant/Advocate

[Rudrayani Shedjale]

but CHA services meaning they have charged service tax on custom clearance & transport.these services take place after the consignment departs from warehouse.

so does that fall in the definition of "input services"?

[CSSANJAY MALHOTRA]

Dear Rudrayani,

CENVAT Credit of Input Services (Rule 2L of CCR 2004) is allowed for services used in relation to goods upto the "PLACE OF REMOVAL".

Notification No. 41/2012-Service Tax dated 29.06.2012provides for Refund of specified services which are used beyond the place of removal.

(a) the rebate shall be granted by way of refund of service tax paid on the specified services.

Explanation. - For the purposes of this notification,-

(A) “specified services” means-

(i)in the case of excisable goods, taxable services that have been used beyond the place of removal, for the export of said goods;

(ii)in the case of goods other than (i) above, taxable services used for the export of said goods;

but shall not include any service mentioned in sub-clauses (A), (B), (BA) and (C) of clause (l) of rule (2) of the CENVAT Credit Rules, 2004;

(B) “place of removal” shall have the meaning assigned to it in section 4 of the Central Excise Act,1944(1 of 1944);

 

Refer Notification No. 21/2014-CE dated 11.07.2014 which elaborates definition of "Place of Removal" In case of Physical Exports taking place out of India, ICD / Gateway Port is the Place of removal as the goods are sold when B/L is issued.

Notification No. 21/2014-CE dated 11.07.2014
2. In the CENVAT Credit Rules, 2004 (herein after referred to as the said rules), in rule 2, after clause (q), the following clause shall be inserted, namely -
„(qa) “place of removal” means-
(i) a factory or any other place or premises of production or manufacture of the excisable goods;
(ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty;
(iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory,
from where such goods are removed;‟

Submission:

Commission is in the nature of Sales Promotion activity and is specifically mentioned in the "Inclusive part" of Input Service definition, hence CENVAT Credit is admissible.

Courier Services, one has to correlate whether the same has taken place after the B/L is issued i.e. clearance of goods from Port, if Yes, then No CENVAT allowed.

CHA Services includes various aspects such as Terminal Handling Charges, Drawback clearances charges, Custom Clearance charges, Licence Registration Charges, sometimes they charge for transport in their Invoice and it can't be concluded that CENVAT Credit is admissible on CHA Services.

CHA Charges for what activity???????? needs to be figured out first and then correlation to be made whether the services are rendered before or after clearance from place of removal.

Various citations are there wherein CHA charges have been allowed or disallowed depending upon the performance of activity and its linkage with Place of Removal definition.

It's always advisable to apply for Service Tax Refund or to claim Service Tax Drawback to avoid any litigation.

regards

---

[Rudrayani Shedjale]

Dear Sir

CHA has charged service tax on Customs clearance & Transport, Terminal Handling Charges, B/L Charges,ADC Charges.

Courier charges are those which are incurred for sending samples (product samples) to customer & also for sending shipping documents to customers.

so please advise.

[Rudrayani Shedjale]

I have gone through the Notification no.52/2011-Service tax which provides the list of "specified services" which are eligible for refund but CENVAT credit cannot be taken.

in which

• Services provided by clearing & forwarding agent (CHA) in relation to export goods
• Service provided by a courier agency to an exporter in relation
  to transportation of time sensitive documents, goods or articles relating to export, to a destination outside India.
• Service provided by a technical testing and analysis agency, in relation to technical testing and analysis of said goods.

are mentioned.

so as per this notification, our most of the services falls in the category of refund but not CENVAT credit??

or is this notification amended??

please advise.

[CSSANJAY MALHOTRA]

Notification No. 41/2012-ST is the amended one.... Please refer to same.

[Rajagopalan Ranganathan]

Madam,

When services are exported rebate of excise duty and cesses paid on inputs and service tax and cesses paid on input services utilized for export of services has to be claimed under Notification No. 39/2012-ST dated 20.6.2012 (This Notification comes into effect on 1.7.2012. But you have to file a declaration prior to export of the service with your jurisdictional Deputy/Assistant Commissioner who will grant the rebate after satisfying himself about the correctness of the declartion made as per procedure prescribed therein.

AI Summary

CENVAT Credit Eligibility: Security, Transport, Pest Control Valid; Sales Commission Disputed; Courier Depends on Removal Timing A manufacturer of Active Pharma Ingredients inquired about the eligibility of various services for CENVAT credit. The services include security, custom clearance, transport, pest control, sales commission, courier, labor charges, and validation. An expert clarified that all services except sales commission are eligible for CENVAT credit. However, there are conflicting court decisions regarding sales commission, with Gujarat High Court ruling against it and Punjab and Haryana High Court in favor. For services like courier and CHA, the eligibility depends on whether they occur before or after the place of removal, as defined by relevant notifications and rules.