CENVAT CREDIT ADJUSTMENT

[PARVEEN ARORA]

Sir our entity is doing powder coating on job work basis.

That the entity is issue two separate bills one for sale of powder (which is affixed on the principal item) & other one is for labour charges (charges due for affixing the powder on principal item).

That the entity is charging service tax on labour charges.

That the Entity purchases the powder for affixing of powder on principal item.

That the Purchases made from excise dealer & paid excise duty accordingly on purchase of powder.

Now my query is can the entity take the credit of excise duty paid on purchase of powder against his service tax liability.

[Ganeshan Kalyani]

Sir, in my view not eligible for credit. Thanks.

[Mukund Thakkar]

Sir,

As per my view are you eligable for cenvat credit from 01.03.2016. please read defination of cenvat credit rules 2004.along with the changes of last budget.

[KASTURI SETHI]

Sh.Parveen Arora Ji,

Just for additional information pl.

Powder coating does not amount to manufacture.(judgement appended below) Service Tax is applicable but exempted from ST as intermediate product in terms of notification No.25/12-ST dated 20.6.12 as amended as per the following condition:-

30. Carrying out an intermediate production process as job work in relation to

(d) processes of electroplating, zinc plating, anodizing, heat treatment, powder coating, painting including spray painting or auto black, during the course of manufacture of parts of cycles or sewing machines up to an aggregate value of taxable service of the specified processes of one hundred and fifty lakh rupees in a financial year subject to the condition that such aggregate value had not exceeded one hundred and fifty lakh rupees during the preceding financial year;

A.G. SHIBU Versus COMMISSIONER OF CUS., C. EX. & S.T., COCHIN2008 2008 (1) TMI 105 - CESTAT BANGALORE= (10) S.T.R. 317 (Tri. - Bang.)

[Ganeshan Kalyani]

Nicely explained by Sri Kasturi Sir. Thanks.

[Ganeshan Kalyani]

Sri Mukund Ji for enriching my knowledge can you please reply with reference to provison. Thanks.

[CSSANJAY MALHOTRA]

Dear Friends,

Querist has not specified that “Powder coating” has been undertaken in relation to which industry. We all agreed and further have been specified in law, that powder coating does not amount to manufacture and hence, service is liable to service tax.

Notification no. 25/2012-ST (Serial No. 30) regarding Mega Exemption has specified processes (including power coating) during the course of manufacture of parts of cycles or sewing machines & not in GENRAL, hence this exemption shall be available only if process undertaken by Querist falls under the process mentioned in notification no. 25/2012-ST (Serial No. 30)

Querist could have followed the process of raising single invoice for Works Contract Service also thus charging service tax thereat (CENVAT is admissible on Powder coating material) and adjusted CENVAT against service tax liability.

As the Querist has taken different route which is also admissible, the 2 set of invoices i.e. one for sale of powder and other for labour charges, therefore, in such case, service tax shall be leviable on labour charges and the Excise Duty paid on powder coating materials is admissible as CENVAT Credit which can be set off against Excise duty paid on material billed separately. Service Tax on labour charges is to be deposited in Cash or adjusted against Input or Input Service credit available if any.

[KASTURI SETHI]

Sh.CS Sanjay Malhotra Ji,

Sir, It is really "Panacea Reply". No exaggeration. Thanks for enlightenment on the issue.

[KASTURI SETHI]

Sh.CS Sanjay Malhotra Ji,

Sir, You seldom appears on the forum. When you appear, all visitors (including experts) learn from you. It is a fact. Nobody can deny. Thanks.

[MUKUND THAKKAR]

I am 101% agree with Kasturi sethi ji ,

[CSSANJAY MALHOTRA]

Dear Sh. Kasturi ji / Sh. Mukund ji / All my friends,

Appreciate your kind words. Have learnt lot from you also as learning is never ending process. My efforts will also be there to contribute as you all do actively. Thanks once again.

AI Summary

Cenvat credit eligibility clarified: excise duty on coating material may be credited while service tax on labour remains payable.
Where the supplier issues separate invoices for sale of powder (with excise duty) and for labour (with service tax), the excise duty paid on the coating material is admissible as Cenvat credit and may be adjusted against excise duty on the material billed separately; service tax on the labour component remains leviable and must be discharged in cash or by utilising available input or input-service credits. The Mega Exemption is limited to specified processes for parts of cycles or sewing machines and does not apply generally.