credit on paint purchased

[felix ka]

Hai TMI experts,

We are manufacturers of dutiable final products. We want to seek the service from a registered contractor towards the ‘painting of the capital goods and plant area’. The contract mainly consists of two parts:

• Supply of prescribed quantity of paints from a recognized paint company and 
• Labour charges for application of paints in the machinery and plant area.

Separate rate schedules for supply and labour are specifically given in the contract. The contractor gets the invoice towards paint purchase in his name and we are indicated as the ‘consignee’.

The contractors (in their bill to us) are showing the material cost and labour charges separately; but part of the same invoice. The material cost is based on actual usage (Not on the receipt of paint in the factory). In this back ground I have the following queries:

1. Paint used for painting plant & machinery are eligible inputs for CENVAT Credit or not.
2. Whether the invoice indicating us the ‘consignee’ is sufficient for taking credit.
3. To avail the CENVAT Credit on paint, whether we have to pay ST on total value shown in the invoice of the contractor?
4. Can we bifurcate the contract to pay Service Tax only on the labour charges and claim the benefit of notification no: 12/2003-ST (no ST on material part) or ST is to be paid on the combined value of labour & material?
5. If we do not pay ST on the paint, will it affect our CENVAT Credit availability of the excise duty paid on paint purchase?

AI Summary

Manufacturer Seeks Clarity on CENVAT Credit for Paint Used in Capital Goods; Experts Weigh In on Eligibility, Invoicing A manufacturer of dutiable products sought advice on claiming CENVAT Credit for paint used in painting capital goods and plant areas. The contract with a registered contractor included separate charges for paint supply and labor. Queries included eligibility for CENVAT Credit, sufficiency of invoices indicating the manufacturer as consignee, and applicability of Service Tax (ST) on labor versus combined charges. Responses varied: one expert stated paints used for maintenance are eligible for CENVAT Credit, another emphasized proper receipt and accounting of paints, and a third clarified that non-payment of ST on paint does not affect CENVAT Credit availability.