Service tax credit on car repairing against excise duty

[HARDIK JANI]

Dear Sir,

It can be possible to take Cenvat credit, of Service tax paid for director's car repairing & insurance , against payment of excise duty? If possible then under which provision ?

[Rajagopalan Ranganathan]

Sir,

As per rule 2 (k) (D) of Cenvat Credit rules, 2004 motor vechicles are excluded from the definition of inputs. Hence you are not eligible to take credit of service tax paid for director's car repairing and insurance.

[YAGAY andSUN]

There is specific denial on availment of CENVAT credit on Motor Vehicles except by some prescribed categories.

[Ganeshan Kalyani]

In my view there is nexus with the business. The director of the company needs travel to crack business deals, need to meet other business tycoons to develop business for which car is provided by the company. The company now a day has a concept called CTC which means the instalment of the car, petrol expense and it's maintenance is also included in the salary component of the director. The maintenance of the director's car is taken care by company. In my view if the car is maintained then how would the director of a company be able to discharge his duty. Thus there will be a impact indirectly on the progress of the company. The sale may come down as he will not be able to travel immediately when the meeting is fixed and hence has impact on production as well because if sale comes down then production too has to bring down. Hence the credit on the repair and maintenance of car of director is eligible to set off against excise duty liability.

However, litigation cannot be ruled out. Thanks.

[YAGAY andSUN]

"Provided car is registered in the name of the Company".

[KASTURI SETHI]

Dear Querist,

It is relevant for you.

EXTRACT OF BUDGET CHANGES 2011-12

14.4 Similarly services relating to motor vehicle i.e. rent-a-cab, use of tangible goods, insurance or repair of vehicle shall not constitute an “input service‟ except in respect of output services where credit on motor vehicle is permitted as “capital goods”.

AI Summary

Can Cenvat Credit Apply to Director's Car Repairs? Rules 2004 Exclude Motor Vehicles, Creating Legal Uncertainty. A query was raised about the eligibility of claiming Cenvat credit for service tax paid on a director's car repairs and insurance against excise duty. Responses highlighted that under the Cenvat Credit Rules, 2004, motor vehicles are generally excluded from the definition of inputs, thus disallowing such credits. However, one opinion suggested that if the car is essential for business operations and registered in the company's name, credit might be justifiable, though litigation risks exist. Another response noted that services related to motor vehicles are not considered 'input services' unless the vehicle is classified as 'capital goods' for certain output services.