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Removal of Input as such one unit to Other unit - Reversal of Porportionate Service tax credit - reg

venkataraman swaminathan

We are manufacturers of automobile components . We have 2 units Unit 1 & Unit 2 - As and when needed we are clearing Inputs as such from one unit to other unit on payment of appropriate duty of excise ( ie. reversal of cenvat credit taken) . Now Excise audit raised one audit point , asking us to reverse the service tax credit taken on common services like security , contract manpower etcc.. or 7% of the input as such clearance value. We are availing eligible service tax credit on various input services and also paying service tax under RCM.

Request your legal opinion on this audit point from legal experts. Thanks v.swaminathan.

Automobile Component Manufacturer Challenges Excise Audit on Service Tax Credit Reversal for Common Services Under Rule Interpretation A manufacturer of automobile components with two units is addressing an excise audit query regarding the reversal of service tax credit on common services when transferring inputs between units. The audit suggests reversing service tax credit on services like security and contract manpower or 7% of the input clearance value. A legal expert clarifies that such services, if not common to both units, do not require credit reversal when transferring inputs. Another expert argues that the audit's demand for reversing service tax credit on common services is excessive and not supported by relevant rules, suggesting that only input duty credits need reversal. (AI Summary)
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