CENVET CREDIT ON THE BASIS OF REIMBURMENT INVOICE

[hardik thacker]

SIR,

I AM WORKING IN ON THE GOVT. ORGANISATION

IN OUR ORGANIZATION ALL WORKS CONTRACT ARE CONTAINS THE CLAUSE THAT 'THE SERVICE TAX WILL REIMBURSE TO SERVICE PROVIDER ONLY ON PRODUCING PROOF OF PAYMENT OF SERVICE TAX.'

E.G ONE PARTY HAS RAISED FIVE INVOICE WITH SERVICE TAX IN DIFFERENT TIME OF THE YEAR.

HOWEVER OUR ORGANIZATION WILL PAY ONLY SERVICE VALUE AT THAT TIME

NOW FOR CLAIMING SERVICE TAX THE SAME PARTY WILL ISSUE 'SEPARATE CLAIM' WITH PROOF OF PAYMENT OF THE SAME.

AT THE TIME OF REIMBURSEMENT OF SERVICE TAX THE TIME LIMIT OF ONE YEAR HAS BEEN ALREADY ELAPSED.

MY QUERY IS THAT, WHETHER CENVAT CREDIT CAN BE TAKEN ON THE BASIS OF SUCH 'SEPARATE CLAIM'

[KASTURI SETHI]

Yes. Cenvat credit of Service Tax can be taken. There are two basic parameters. These are:-

Service Tax should be paid on input service and it can be utilised only for payment of taxable output service or dutiable excisable goods. No doubt such "SEPARATE CLAIM" is not prescribed document for taking credit but as per definition of "gross amount charged" in Explanation (c) to Section 67 of the Finance Act, 1994 (Below Para no.4) mode of payment of Service Tax is valid as per law. Payment of ST through reimbursement by way of separate claim is valid and credit can be taken.

[hardik thacker]

Thank you very much sir,

I was in confusion since long..

Thank you.

AI Summary

Cenvat credit on reimbursed service tax permitted when tax is paid and used for taxable output services. Cenvat credit is permissible where service tax has been paid on input services and is used only for payment of taxable output services or dutiable excisable goods. Reimbursement by a separate claim or reimbursement invoice, when supported by proof of payment, is a valid mode of payment for service tax under the definition of 'gross amount charged,' and therefore does not preclude taking credit.