Service Tax Credit on Rent received

[Nisar Ahmed]

A Ltd. has a depot at Jaipur which is not registered under excise and has been taken on rent. In such depot, the operations of its 2 subsidiaries namely X Ltd. and Y Ltd. are also carried on. The areas provided to both subsidiaries are excise registered and clearly identifiable.

A Ltd. pays the rent of the depot along with service tax and avail CENVAT credit. The rent attributable to the area of 2 subsidiaries has been recovered from them after charging service tax.

During an audit, the department contended that the CENVAT credit taken on rent of the premises should be disallowed to the extent of the area given to subsidiaries on the ground that such area is not used by A Ltd for storing the goods and hence A Ltd is not eligible to avail CENVAT credit.

Is the Service Tax Credit denied?

AI Summary

A Ltd. Faces CENVAT Credit Dispute Over Subsidiaries' Space Usage Without Manufacturing Excisable Goods; Registration Key. A Ltd., which operates a depot in Jaipur not registered under excise, rents space to its subsidiaries, X Ltd. and Y Ltd., who are excise registered. A Ltd. pays rent with service tax and claims CENVAT credit, but the tax department argues that credit should be disallowed for areas used by the subsidiaries. The consensus among forum participants is that A Ltd. cannot claim credit for the subsidiaries' areas unless it manufactures excisable goods. The discussion highlights the importance of proper registration and credit allocation based on usage.