service tax & Excise query

[VISHAL PURI]

We are a SSI manufacturer & Service Provider of Maintenance & Repair. we have a audit objection i.e we registered with Service Tax on 01-04-2014 after cross limit 10 lacs, then we take the service tax credit on rent of building & other business auxiliary service aprox 0.72 lacs, then we cross the ssi exemption limit and registered with central excise on 20-10-2014. we regular take the credit on excise & service tax. we pay the service tax on service providing by cash but not utilzed the service tax credit, year end we adjust the service tax credit on excise duty payment. audit team object that we can not take the credit & utilized on service tax credit before central excise registration i.e oct-2014. kindly advice audit team is right or worng.

vishal puri

[DR.MARIAPPAN GOVINDARAJAN]

There are case laws in which High Courts allowed to take credit for the payments even before the registration.

[Rajagopalan Ranganathan]

Sir,

You have registered yourself under Finance Act 1994 on 1.4.2014 since you had crossed the limit of 10 lakhs. You have registered under Central Excise Act, 1994 on 20.10.2014 after crossing the SSI limit of ₹ 1.5. crores. During the period between 1.4.2014 to 19.4.2014 the excisable goods manufactured by you were exempted. Therefore you cannot take credit of duty paid on inputs and service tax paid on input service which are utilized for manufacture of exempted goods.

However you have earned a credit of 0.72 lakhs on input services received by you between 1.4.2014 to 19.10.2014 but you have not utilized the same and used it for payment of duty on excisable goods cleared on or after 20.10.2014. There is no prohibition for doing so either under Central Excise Law or Finance Act 1994. Therefore what you have done is as per law. You may contest the audit objection.

[DR.MARIAPPAN GOVINDARAJAN]

A very lucid explanation, Sir

[Ganeshan Kalyani]

Sir, I am also of the same view as opines by Sri Rajagopalan Sir and Sri Mariappan Sir.

The service is an input. It was used in or in relation to manufacturing activity. The final product is excisable. Only thing it was not crossing the threshold limit. Merely the turnover was not crossing the limit does not make the credit ineligible. The definition of input service is satisfying. The credit is eligible. Thanks.

[Ganeshan Kalyani]

Sri Vishal Puri Ji,

I have assumed in my reply that input service has a nexus with the manufacturing activity. Please validate my assumption. Thanks.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

Your replies are in consonance with the reply of Sh.Ranganathan, Sir. All replies are legally correct. It is natural that nexus is mandatory. From the query and penetrative reply by Sh.Ranganathan, Sir it is clear that all experts are correct. No room for doubt.

[Ganeshan Kalyani]

Thanks for your support and appreciation. In fact your appreciation is an acknowledgement and remuneration to my effort. Thanks.

[YAGAY and SUN]

In support of our experts' view on this matter, we share following order of Tribunal:

2016 (9) TMI 536 - CESTAT KOLKATA

Cement Manufacturing Company Versus Commr. of Central Excise & Service Tax, Shillong

In: Service Tax

Dated:- 6-9-2016

Excise Appeal No. 1015/11 & Service Tax Appeal No. ST/384/11

[KASTURI SETHI]

Thanks to M/s. Yagay and Sun, Experts for posting such useful case law promptly.

[Ganeshan Kalyani]

Yes the cited case law would be helpful to Sri Vishal Ji, the credit is eligible anyway. Thanks.

AI Summary

Service tax credit eligibility: input service credits can be utilised against excise duty after excise registration when nexus exists.
Credit of service tax on input services paid after Finance Act registration but before central excise registration may be carried forward and utilised against excise duty after excise registration if the services have a nexus to manufacture of excisable goods and there is no statutory prohibition; credits related to exempted goods during the accrual period remain ineligible.