Utilising Cenvat Credit for making service tax payment

[sunil mehta]

Daer Sir, A mfg. of textiles product(twisted yarn & grey cloth) also receives commission from yarn spinner on yarn sold by them.The mfg.concern pays the ser.tax due on commission income under bus.auxilliary category.The company also manufactures TFO machines on small scale basis for sales purpose and for captive use.It gets some m/c parts processed on job-work basis on which it pays ser.tax. Thus,they are mfg.of taxable as well as exempted goods.It wants to take cenvat credit set-off on ser.tax paid by them on 'job charges' as input services against service tax payable by them on commission income. Query:1)Whether the cen.credit set-off is legally correct? Note:The input ser.tax on job charges(on m/c) has no direct nexus with comm.income earned on sales of yarn.Only thing common is that all activities are done by one concern. Thanking you, sunil mehta

AI Summary

Cenvat credit nexus: lack of direct nexus bars credit on job-work service tax against commission service liability.
Whether service tax paid on job-work qualifies as cenvat credit against service tax on commission income depends on nexus: if job-work is manufacture then service tax does not apply; if taxed, it must be an input service directly linked to the commission service. Mere common conduct of activities by one concern does not establish the required connection, and without that direct relationship the credit is not permissible.