CENVAT Credit on Legal services

[Binu Karuthedath]

Dear Experts

On of the Excisable manufacturer have paid legal service charges for Frame work of Brand Sale agreement and they have paid Service Tax under reverse charge system and allready taken CENVAT Credit for payment of Excise Duty.But Department has been objected to take CENVAT Credit on legal services. Their aragment is it is nor related to manufacturing and not eligible for CENVAT credit. Kindly clarify

[Rajagopalan Ranganathan]

Sir,

Legal service availed by a Business in respect of any field and service tax paid on such service is available as credit under Cenvat Credit Rules, 2004. There is no restriction in Cenvat Credit Rules, 2004 that legal services availed in respect of manufacture of excisable goods or provision of output service alone are input service and service tax paid on such input service alone is eligible as credit. Moreover as per rule 2 (l) of Cenvat Credit Rules. 2004-

“input service” means any service, -

(i) used by a provider of output service for providing an output service; or

(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal,

and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services,inward transportation of inputs or capital goods and outward transportation upto the place of removal;

The rule merely says "legal service". Therefore you are eligible to avail the credit of service tax paid in respect of legal services availed by you.

[Ganeshan Kalyani]

I agree with the views submitted by Sri Rajagopalan Sir. Service tax credit is eligible for service tax paid on legal consultancy services. The base rule is well explained by Sir. You may take the credit. Also ensure the address mentioned on the invoice. May be the rejection would be based on the address. Sometime the service is availed by the manufacturing unit but invoice is raised in their Head Office address. If this is the case direct credit should not be taken. The credit should be distributed by the Head Office and based on that invoice credit should be taken. Anyway first check the reason for the rejection. In case any further query please come back. Thanks.

AI Summary

Cenvat credit on legal services available when used in relation to manufacture, subject to correct invoicing and allocation. Legal services are listed as an input service under rule 2(l) of the Cenvat Credit Rules, 2004 and service tax paid on legal consultancy is generally eligible as CENVAT credit when used by a manufacturer in or in relation to manufacture and clearance; however, direct credit can be restricted by invoicing particulars-if the invoice is raised to head office the credit should be distributed by the head office and taken by the manufacturing unit only as allocated.