Cenvat credit of custom duty

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

13 January 2012 Sir, we are in business of importing product and trading in india. During Import, we pay Basic custom duty, CVD, cess, Additional duty 4%. We sell product in India levying sales tax (No Excise). We also charge our customer for installation & repair of the product and raise Service charge Bill levying Service Tax 10.3%. My Query is whether we can take custom duty paid as cenvat credit agst Service tax payable?
pl advice.

Ram Avtar Singh

Ram Avtar Singh (Expert)
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13 January 2012 Customs duty is not cenvatable.

Querist : Anonymous

Querist : Anonymous (Querist)

17 January 2012 need detail clarification.

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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19 July 2024 No, you cannot take the customs duty (including Basic Customs Duty, CVD, cess, and Additional Duty 4%) paid on imported goods as CENVAT credit against the Service Tax payable on installation and repair services. Here's why:

### Nature of CENVAT Credit

CENVAT credit is available on:
- **Excise Duty** paid on goods manufactured in India,
- **Service Tax** paid on input services used in providing output services.

### Limitations on CENVAT Credit

1. **Goods vs. Services**: Customs duty paid on imported goods is not eligible for CENVAT credit because it pertains to goods and not services.

2. **Input Service**: Service Tax paid on input services (like consultancy, advertising, etc.) used in providing taxable services (like installation and repair services) is eligible for CENVAT credit.

### Specific to Your Query

- **Customs Duty**: This is a duty levied on imported goods at the time of importation into India. It is not considered an input service used directly in providing output services (installation and repair services).

- **Service Tax on Installation and Repair**: This is a tax levied on the service provided (installation and repair). Service Tax paid on input services used directly in providing these services (like labor charges, transportation, etc.) can be availed as CENVAT credit.

### Conclusion

Since customs duty paid on imported goods is not considered an input service used in providing output services (installation and repair services), you cannot claim CENVAT credit for customs duty against the Service Tax payable on these services. Each type of tax and duty has specific rules governing their credit eligibility, and in this case, customs duty does not qualify under the CENVAT credit scheme for offsetting against Service Tax liability.

For accurate compliance with tax laws and to optimize your tax credits, it's advisable to consult with a tax professional who can provide guidance based on your specific business operations and transactions. They can help ensure you maximize eligible credits while adhering to regulatory requirements.