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

Manufacturer Seeks Cenvat Credit on Freight Services; Clarification on Taxable Portion and Rule 2(l) Applicability A manufacturer of packaging products inquired about the eligibility of Cenvat credit on service tax charged for freight services provided by vessels, specifically transported by rail containers within India. They noted that the service tax was charged on 40% of freight charges. A respondent clarified that the correct taxable portion under service tax should be 30%, following an abatement adjustment. The respondent also explained that under Notification No. 08/2015, Cenvat credit on inputs, capital goods, and input services is not allowed if used for providing taxable services. However, they believed the manufacturer could still claim Cenvat credit under Rule 2(l) of the Cenvat Credit Rules.