Cenvat credit of st paid to motor vehicle (car) provider

This query is : Resolved

Radhey Shyam Agrawal (Querist)
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02 February 2016 Our client provide telecommunication service (service receiver), for this they are receiving the service of renting of motor vehicle for the employees to see the faults at their various tower locations and paying ST to the service provider of renting of motor vehicle.
Can our client (service receiver) avail/utilize the CENVAT Credit?
Please help.
Thanks

Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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02 February 2016 Payment of Service Tax on Rent-a-Cab scheme as a service recipient under the Reverse charge Mechnism is NOT CENVATABLE. Hence no CENVAT Credit can be availed.

Radhey Shyam Agrawal

Radhey Shyam Agrawal (Querist)
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03 February 2016 Sir, please provide the reasoning with legal support.

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Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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03 February 2016 The Scheme of Central Excise offers CENVAT Credit to reduce the cascading impact of duties on the final product. This Scheme was first introduced in 1986 by Finance Minister V.P.Singh as MODVAT. It was later streamlined re-appeared as CENVAT probably in the year 2000. The CENVAT Credit Rules 2004 lay down the definitions of Input goods and Input services in Rule 2(l). Rule 2(l) was amended by Finance Act 2011 to specifically exclude expenses on Rent-a-cab Services (refer Notification No: 3/2011 - CE(NT) as amended in July 2012). Prior to that payment of Service Tax on Rent- a- cab services was an allowable input. Further Notification No: 26/2012 allows an abatement of 60% (currently 50%) on Rent-a-cab service in computing the tax liability. Central Excise Rules permit an assessee either abatement / exemption and lower level of taxes or payment of full duty and availing of CENVAT Credit. Notification 30/2012 which imposes the Reverse Charge liability of Rent-a-cab on the service recipient vide entry 7 enumerates this liability as "if the service provider charges abated duty then 100% else service provider to pay 60% and service recipient 40% (currently 50:50). Therefore since the service recipient avails of abatement, (apart from the specific exclusion in Rule 2(l) of CENVAT Credit Rules 2004), the scheme of Central Excise would exclude the availing of CENVAT Credit.