Availment of Cenvat credit of additional duty on capital goods

[sunil mehta]

Rule 3(1) (viia) of CCR, 2004, permits a mfg. or producer or a provider of taxable service to take credit of -' the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, '-as capital Goods C.Credit. Provided that a provider of taxable service shall not be eligible to take credit of such additional duty; But Explanation to Rule 3(1) says that ..'.- For the removal of doubts it is clarified that the manufacturer of the final products and the provider of output service shall be allowed CENVAT credit of additional duty leviable under section 3 of the Customs Tariff Act on goods falling under heading 9801 of the First Schedule to the Customs Tariff Act. Query:-1)Whether a service provider(under mining services) can avail capital goods cenvat credit of 'addln. duty of customs ,if he imports the machinery and uses it for limestone extraction in a cement factory on contract basis?

[Mukesh Kumar]

if u see the arrangements of the provisions rule 3 of the cenvat credit rules, 2004, cenvat credit of duty paid under section 3(5) is allowed without any restriction including on project imports. However, there is restriction on utilizing the same. Credit of duty paid u/s 3(5) can not be utilized for payment of service tax.

[sunil mehta]

Dear Mukeshbhai, My query relates to a service provider.As per your reply, he can avail cenvat credit of additional duty paid under section 3(5) of customs Tariff Act,on project imports but ,such cenvat credit cannot be utilised by service provider for payment of service tax.Then for what purpose a service provider can utilise such credit of additional duty as explained above?

AI Summary

Cenvat credit of additional customs duty allowed for capital goods but cannot be used to discharge service tax liabilities. Rule 3(1)(viia) permits CENVAT credit of the additional duty under section 3(5) on capital goods, including project imports, and the Explanation allows manufacturers of final products and providers of output services to take credit on goods under heading 9801; however, utilisation is restricted because such credit cannot be applied for payment of service tax.