utilization of SAD credit

[Vijay kumar]

Can the credit of SAD (special additional duty) be utilized for payment of central excise duty or service tax by a manufacturer or service provider? If not, what are the barring provisions? Please reply soon.

[YAGAY andSUN]

Sub rule (viia) of Rule (1) 3 of the CENVAT credit Rules states that A manufacturer or producer of final products  shall be allowed to take credit of the additional duty leviable under SUb-section (5) of Section 3 of the Customs Tariff Act.

Provided that  a provider of taxable service shall not be eligible to take credit of such additional duty.

 

[Reshma kochar]

Hi,

Pradeep, I didn't find that aforsaid provision in CENVAT credit rules. Please update me... 

[YAGAY andSUN]

Ms. Reshma,

You can find this information on R.K. Jain's - Central Excise Manual 52nd edition (2010-2011) on page no. 2.26  entry no. viia of Rule 3 of the CENVAT credit Rules, 2004.

Best Regards,

Pradeep Khatri

[Reshma kochar]

Thanks pradeep, but its not in cenvat credit rules published on the website(tax managment india) Rule 3  says both manufacturer and service providers are eligible for the same.

[YAGAY andSUN]

Ms. Kochar,

Further, you can refer Taxmann's Central Excise Law & Procedure - Written by Mr. V.S.Datey, 17th Edition, chapter no. 24, para 24.1, line no. 9 which says " Additional Customs Duty u/s 3(5) of the Customs Tariff Act w.e.f. 1-3-2005 (SAD or Special CVD).  This credit will not be available to service providers.

Further, it is an old saying that ' When in doubt, refer a book'. 

Best Regards,

Pradeep Khatri

 

[Alok Kumar]

ms reshma,

you are correct, the same has not been mentioned in the TMI WEBSITE.

the rule has been rightly quoted /cited by our learned brother and there should not  be any room for confusion on the subject considering the  specific mention of the said restriction in sub rule 4 of said rule.

thanks,

alok kumar

[YAGAY andSUN]

Ms. Kochar,

Restriction on utilization of 4% Additional Customs Duty - Additional Customs Duty paid u/s 3(5) of customs tariff act can be utilized for payment of any duty on final product but not for any output services [Third proviso to Rule 3(4) and second proviso to rule 5 of CENVAT credit Rules].

Best Regards,

 

Pradeep Khatri

[Vijay kumar]

The reason for not permitting credit of SAD to a service provider is because SAD is a levy to counter local taxes on goods and services do not suffer such taxes.

[sv bhasker]

Dear Mr vijay

Your question lead to an intereting(SAD?) discussion. Your summing up giving reasons for allowing credit in excise law  and not extendind SAD credit in service tax  is really good. It seems that SAD is imposed by the government on the basis of request made by the trade and industry. 

AI Summary

SAD credit availability: manufacturers can claim it, but service providers are precluded under CENVAT rules. Credit of the Special Additional Duty under Section 3(5) of the Customs Tariff Act is available to manufacturers or producers of final products under the CENVAT Credit Rules, while service providers are expressly precluded from taking such credit by provisional restrictions in Rule 3 and related provisions; the practical rationale is that SAD compensates for local taxes on goods, which do not apply to services.