Cenvat credit on works contract.

[MAYUR BHIRUD]

Dear experts,

We are manufacturer of chemical and executes a works contract for modernization of factory buildings( like painting, plastering). We already paid service tax under reverse charge mechanism. Can we take cenvat credit on service tax paid on works contract services.

Please give your valuable advice.

[Ganeshan Kalyani]

Sir, In my view you cannot take the credit. Thanks.

[JSW CEMENTLIMITED]

Sir

From your query it appears that the service falls in the caregory of repair and maintenance of factory building. In my view service tax credit can be availed. Hopefully service tax has been paid on 70% value of service

[YAGAY andSUN]

In the definition of Input Service, the word/phrase modernization of factory is specifically included. Hence, in our view painting, plastering is nothing else but repair of factory premises, CENVAT credit shall be allowed.

[KASTURI SETHI]

I endorse the views of M/s. JSW Cement Ltd. and M/s.Yagay and Sun, Sirs. Under RCM the assessee has to pay ST in cash and thereafter to take the credit.

AI Summary

Chemical Manufacturer Debates CENVAT Credit Eligibility for Service Tax on Factory Modernization Works Contracts under Reverse Charge A manufacturer of chemicals inquired about the eligibility to claim CENVAT credit on service tax paid under the reverse charge mechanism for works contracts related to factory building modernization, such as painting and plastering. One expert advised against claiming the credit, while others argued that since modernization is included in the definition of Input Service, the credit should be allowed. They suggested that the service tax credit can be availed, especially if the tax was paid on 70% of the service value. Another expert supported the view that CENVAT credit should be permissible.