Input service tax credit distribution to outsourced manufacturing unit

[Kadayam Ganapathy Subramanian]

Dear Experts,

As per amended Rule 7 of Cenvat Credit Rules, 2004, the input service distributor can distribute the service tax credit to the outsourced manufacturing unit and such unit has defined in the aforesaid rule to mean that a job-worker who is required to pay duty on the value determined under the provisions of rule 10A of the Central Excise Valuation (Determination of Price Of Excisable Goods) Rules, 2000, on the goods manufactured for the Input Service Distributor or a manufacturer who manufactures goods, for the Input Service Distributor under a contract, bearing the brand name of the Input Service Distributor and is required to pay duty on value determined under the provisions of section 4A of the Central Excise Act, 1944.

Since Section 4 is not mentioned in the second part of the above said definition, whether Input Service Distributor can distribute the service tax credit to the outsourced manufacturing unit who manufactures goods for the Input Service Distributor under a contract, bearing the brand name of the Input Service Distributor where such goods are assessed duty under Section 4 of Central Excise Act, 1944.

Please offer your comments.

Regards,

K.G Subramanian

AI Summary

Debate on distributing input service tax credit to outsourced units under amended Rule 7 of Cenvat Credit Rules, 2004. A discussion on the distribution of input service tax credit to outsourced manufacturing units under amended Rule 7 of Cenvat Credit Rules, 2004, raises questions about whether the credit can be distributed to units manufacturing goods under a contract with the distributor's brand name, assessed under Section 4 of the Central Excise Act, 1944. One expert suggests the omission of Section 4 might be a manual error, while another agrees, noting that Rule 10A references Section 4. A third participant seeks clarification on whether various manufacturing scenarios qualify as outsourcing units under Rule 7.