Eligibility of Cenvat credit -Service tax charged on Freight charges (Transported by Vessels)

[Guest]

Dear Sir/Madam,

We have manufacture of packaging products and registered in Excise as well as Service Tax.

We are importing our raw material from out of country and the clearance of the same, we have received several bills from CHA in form of Clearing charges, Handling Charges and Freight charges- transport by vessels (By rail container one port to another port in India).

In this regards, we have received freight charges invoices –transport by vessels (By rail container one port to another port in India) from Container Corporation of India, where service tax charges by us on abatement value. (40% of Freight charges on service tax @ 14.50%)

As per amendment in Notification No.26/2012-ST Dated 20/06/2012 through Notification No. 08/2015 Dated 1^st March, 2015, there mentioned availment of cenvat credit on Freight Charges- transport by vessels are not allowed.

Kindly advice us on this points please…………………

Regards,

NJ

[Ganeshan Kalyani]

Sir, the service tax charged by Container Corporation of India on transportation of goods by rail seems to be incorrect. The abatement has been rationalized to 70% and 30% of freight charges is taxable under service tax and not 40% as mentioned in your query.

Further, the Notification no.8/2015 prescribes conditions that 'CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004' . This condition laid down is for the purpose of abatement on transportation of goods by rail service.

As per Rule 2(l) of Cenvat Credit Rules ''input service'', means ''any service 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..........procurement of inputs..........''

In my view you are eligible for cenvat credit as per above provision. However, I welcome views of learned experts as well. Thanks.

AI Summary

Cenvat credit eligibility on freight for rail container transport questioned; abatement and input service conditions determine credit availability. Whether CENVAT credit is available on freight charges where service tax is levied on an abated portion depends on the abatement conditions and the Notification requirement that credit on inputs, capital goods and input services used for providing the taxable service has not been taken under the Cenvat Credit Rules; the definition of 'input service' includes services used in manufacture and procurement of inputs, leading the advisor to view that CENVAT credit may be claimable for such freight-related input services.