New Input Service Distribution Mechanism

[Rahul Mandal]

We have one of our factory located in Jammu & Kashmir (Non Taxable Territory) operating under an excise notification No. 56/2002 with other factories located in Taxable Territory.

The finished goods manufactured at these factories are stock transferred to several depots spread across the country (Taxable territory) wherefrom these goods are sold. These Depots including Headoffice are registered under Service Tax as Input Service Distributor. There are certain common input services which are purchased by Depots / HO,  pertains to all the factories including Jammu Factory. Example of common services are Advertising of products which are manufactured by all the factories including Jammu factory.

My queries are as below:-

1. Whethe we are allowed to avail the cenvat credit of Input Services attributable to Jammu Factory (Non Taxable Territory)

2. If yes, whether the input servcies attributable to Jammu factory can be allocated to other factories located in taxable territory on prorata basis (Turnover Ratio).

AI Summary

Cenvat credit allocation: input service credits from non taxable production may be apportioned to taxable units under ISD rules.
Eligible input services attributable to production in a non taxable territory may be pooled and apportioned for utilisation by taxable territory units when excise treatment under the exemption is effected through notional duty payment and restoration, provided the conditions for credit and the procedural rules for Input Service Distribution and Cenvat utilisation are complied with and the prescribed turnover based apportionment methodology is used.