Cenat credit on GTA services

[Shrikant Gaonker]

A manufacturer of  Sponge iron & power imported coal ( zero %  cenvat duty )  for use in his factory in the manufacture of sponge iron & power.   About 1- 2% of the powder  coal / fine coal generated,  was later sold  at nil rate of duty   as  the coal was not attracting cenvat duty,  at material time.   Out of 1 lakh ton  approx. of coal imported about 2000 ton  is cleared outside the factory prior to 1.3.2011.

 Now the coal is attracting  5% duty  from 1.3.2011 . The dept is  asking for payment of 10%  duty on the value of powder coal  cleared  sating  the service  credit was availed on exepted goods.

The service tax  credit on GTA  availed on  coal sold  is   negligible  however the dept is insisting for  10%  of value of coal sold to be paid as duty  for last five years. 

Pl advise what  best action can be taken not to get involve in any litigation on the issue .

[YAGAY andSUN]

Pay equiavalent CENVAT credit along with interest at applicable rate immediately.

[NEERAJ KUMAR, RANCHI]

I do agree with Mr Khatri's view, Since you have availed cenvat credit on GTA services You are required to pay duty. You ahould not have availed of cenvat credit as you were engaged in the manufacturing of exempted goods.

[Shrikant Gaonker]

THANK YOU SIR

AI Summary

CENVAT credit reversal: pay equivalent credit when input service credit supports clearance of goods subsequently liable to duty. The department alleges that input service credit on Goods Transport Agency services was availed in relation to powder coal cleared and sold, and consequently seeks recovery equal to the equivalent CENVAT credit (treated as 10% of value) for the period; advisory responses recommend immediate payment or reversal of the equivalent CENVAT credit with applicable interest because such credit should not have been claimed in relation to exempt or subsequently dutiable clearances.