CENVAT AVAILAMENT

[RAMESH ANANTHAKRISHNAN]

Dear Sir,

We are in synthetic filaments filed. We produce both exempted as well as dutiable final product. Whenever we produce dutiable finished goods we avail CENVAT credit on the inputs (raw material alone). During the operation we engage contract labours , securities, transport services for which we paid sizeable amount of service tax. Since we produce dutiable and exempted products (Notification 30/2004) we can't distinguish the services related to dutiable as well as exempted products production. Therefore except Raw material we do not avail CENVAT credit for service related matters. Kindly advise whether we can take service tax credit.

[KASTURI SETHI]

SH.RAMESH ANANTHAKRISHNAN,

You can take cenvat credit of Service Tax paid on input service and utilise the same for payment of Central Excise duty. Since you are manufacturing dutiabe and exempted goods you are required to follow the procedure laid down in Rule 6(3) of Cenvat Credit Rules, 2004 for reversal of Cenvat Credit involved on common inputs.

[Ganeshan Kalyani]

I agree with Sri Kasturi Sir. If the input is commonly availed for both dutiable and exempt goods then reversal of credit is required as per the rule mentioned by Sri Kasturi Sir. Thanks.

AI Summary

Cenvat credit on input services may be claimed but requires proportionate reversal when used for both exempt and dutiable production. Input service tax paid by a manufacturer is eligible for Cenvat credit and may be utilised for payment of central excise duty; however, where the same input services are commonly used in producing both dutiable and exempted goods and cannot be separately identified, proportionate reversal of Cenvat credit for common inputs is required in accordance with the applicable reversal procedure.