Mega Exemption notification 25/2012-Compulsion or optional

[Vinay Sharma]

We are manufacturers of auto parts and pay full excise duty on removal of our final products. Please clarity whether mega exemption notification  no. 25/2012 has to be compulsorily availed or it is optional. Some of our Job workers who are covered under serial no. 30 (c) of this notification but do not want to avail this exemption thus charging service tax on their bills. If we avail CENVAT credit of the same, will it be in order or we should compel our job workers to compulsorily avail this notification and do not charge service tax on thier bills raised to us. Please clarify.

[JAMES PG]

Credit at recieving end cannot be disputed even if somebody opts to pay ST instead of availing exemption. Job workers normally opt to pay ST as otherwise they are liable to reverse Cenvat credit in terms of Rule 6 of CCR.

There is restriction in respect of manufacturers wherein the option to pay duty in respect of nil duty items or completely exempted as per tariff is barred ( Ref CBEC Circular 911/01/2010-CX)

 In the case of service providers under threshold exemption limit of Rs 10 lacs, there is  option not to avail the exemption contained in the notification and pay service tax on the taxable services provided and such option, once exercised in a financial year, shall not be withdrawn during the remaining part of such financial year. But in respect of others it is silent, ie , there is neither clear provision nor  specific ban

[YAGAY andSUN]

There is nothing specifically mentioned in the Mega Exemption Notification No. 25/2012 that whether exemptions mentioned in the said notification are compulsory or optional.  But it alway better to go with the language/wordings of the Notification to get rid of any unwarranted situations which may occure in the future.

An exemption Notification should be construed stricly.

Exemption Notification should be read in its entity.  Further, exemption notification has to be read strictly so far as the eligibility is concerned. Conditions stipulating therein cannot be ignored - CCE v Ginni Filaments (2005 (2) TMI 116 - SUPREME COURT OF INDIA) = 2005 (181) ELT 145 (SC 3 member bench).

When wording of a notification are clear, then the plain language of the notification must be given effect to.  An interpretation which is not borne out by the plain wording of notification cannot be given effect to - Excon Bldg. Material Mfg. Co. P Ltd. v CCE (2005 (3) TMI 137 - SUPREME COURT OF INDIA) = 2005 (186) ELT 263 (SC 3 member bench).

Exemption notification has to be interpretated on its wording.  No words, not used in the Notification, can be added - CCE v. Sunder Steels  (2005 (2) TMI 117 - SUPREME COURT OF INDIA) = (181 ELT 154 ) (AIR 2005 SC 1307(SC 3 member bench).

When it is specifically mentioned in the notification that such services would not attract the service tax then why to block the Working Capital in the CENVAT credit account?

[Vinay Sharma]

Sir,

Thank you very much for your timely reply.

Regards

B.C.Joshi

 

 

 

[JAMES PG]

If ST is charged, it is mostly available as Cenvat to the recipient . If availing exemption, either proportionate credit to be reversed or 6% of the value of service to be paid as per the provisions of Rule 6(3) of CCR, which will be a cost.

[Vijay kumar]

Though there is no parallel to Section 5A(1A) of Central Excise Act, 1944 on the Service tax side, it is settled law that there is no option to pay the tax if the exemption is absolute. Nofn.25/2012 is not conditional. In so far as sl.no.30(c) is concerned, ST is payable if excise duty is not payable on the final product. Thus, when the final product is dutiable, the question of payment of ST does not arise and accordingly, there is no option for the job worker to pay the service tax w.e.f. 1.7.2012 in as much as the condition of non-manufacture under Section 2(f) of Central Excise Act, 1944 has been dispensed with. When what is paid is not tax, no credit thereon can be taken or allowed.

AI Summary

Exemption under mega notification may be optional by wording; paying service tax preserves CENVAT credit for recipients. Whether exemptions under the mega notification are compulsory or optional depends on the notification's plain wording and conditions. If a job worker charges service tax, the recipient generally may take CENVAT credit; if the notification mandates exemption, the service provider may not validly charge service tax, and availing the exemption can trigger credit reversal or payment obligations under Rule 6 of the CENVAT Credit Rules.