Credit Received on Post manufacuring activity can i avail credit for central excise payment

[Ramesh M]

We are manufacturer of conveyors, we will manufacture goods in semi finished condition and clear under central excise duty payment to our customer place.  At our customer site we will erect / assemble the all parts and trail the equipments and we will commission the entire plant.  At our customer site all the activities done by our sub vendor, they will complete the work and submit the bill to us with Basic Value + Service Tax.  In this case our HO getting Input service credit on Vendor Bill.  Our HO also have ISD registriation and through ISD our HO transfered accumlated credit to our manufacturing unit.  Now department is objecting to transfer credit and availing credit at factory, because they said 'your HO is getting credit on erection, purely it is post manufacturing / post sale activity so credit is not allowed at manufacturing unit.

Kindly advice me, if any case laws to come out this issue.

 

[YAGAY andSUN]

If you are separately charging Erection charges from your customer alongwith Service Tax as output service, then, in this scenario you may avail the CENVAT credit.

One more point may be of your use that if the amount charged by the subcontractor from you, are included in the assessable value of the goods at the time of removal from your factory premises on which you had paid the duty, then, you can avail the CENVAT credit.

Please check the scope of work in your agreement, whether the contract is devisible or not, on which part of the contract you were paying the Central Excise duty and on which part of the contract you were paying service tax, will surely make your life easy.

[Ramesh M]

We will get the order from our customer for Supply and Erection seperately. 

We will make the invoice to customer for entire order value + Excise Duty while deliver the goods.

After completion of installation we will make Invoice for entire service order value + Service Tax

 

 

 

[sv bhasker]

Dear Sri Ramesh,

You can not take credit of the service tax paid by your sub vendor in your manufcaturing unit as the erection and commissioning services done at customers place are not your input services. In fact these services are input services to your customer who ultimately bear the burden of service tax.  Department is very much correct in denying credit to you, though on a different reasoning. Legally speaking, you are entitled to the said input service credit of erection service if you discharge service tax on the said services rendered at your customer's place by sub vendor on your behalf. In fact, it appears that you are also liable to pay service tax by taking credit of the tax paid by sub vendor. 

AI Summary

Cenvat credit entitlement for erection and commissioning services hinges on contractual allocation and who bears service tax burden. Whether CENVAT credit is admissible for service tax on erection, assembly and commissioning done by a subcontractor at the buyer's site after removal: credit may be allowed if the manufacturer separately treats erection as an output service charged with service tax or if subcontractor charges are included in the assessable value at removal, and contractual divisibility and allocation of duty versus service tax are relevant; alternatively, such services may be treated as consumed by the buyer and not input services of the manufacturer unless the manufacturer itself discharges the service tax on those services.