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.

AI Summary

Reversal of service tax credit not required on inputs-as-such transfers unless services are used for mixed taxable and exempt outputs.
When inputs transferred "as such" between units require reversal of cenvat duty credit on the physical inputs, this does not automatically mandate reversal of service tax credit on separately procured input services. Reversal of input-service credit is required only where those services are used for both taxable and exempt outputs (mixed use); where services are exclusively consumed by separate units, reversal of ST credit is not triggered and the audit demand to reverse ST on inputs-as-such clearance is unsustainable.