credit of service tax paid on GTA - outward freight

This query is : Resolved

Harsh Raiyani (Querist)
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06 September 2007 A Co. having mfg units in India, is also into trading activity for the very same item which it manufactures. The co has entered into JV with those co's.

The outward freight from that JV co. to the depot of mfg co. is paid by the mfg co. The JV co. is not having any depot of its own.

Under such a situation, can this mfg unit avail CENVAT credit of service tax paid on outward freight (considered as inward freight for it) and distribute the credit to its mfg units (service tax distributor).

CA Prasanna Krishnan V

CA Prasanna Krishnan V (Expert)
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16 September 2007 Dear Sir

To claim credit of service tax paid either it should be input service tax or input duty.

What you receive is relating to 'resaleable goods'. Thus the same cannot be input duty.

Input should be relating to manufacturing directly or indirectly.

When there is no output service you can not relate your input service tax paid (as freight) to output service too.

Hence, in case of input service tax payment no matching output manufacture/ANY output service tax is there. Hence it is advisable to avoid credit taking in respect of such tax.

In contrast if you have any output service tax payable any where in India, input distribution Under Rule 2 (m) of the CENVAT credit rules 2004 is advisable. Please consider my reply in the light of recent meaningful excise audits.