how to bifercate input service tax credit

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

29 May 2010 a copmany,registered with service tax act, is the dealer of coal . it also raise service bill at head office level for loading and supervision charges. can the company teke input tax benefit on any bill raised on it.please tell whether comapny can't take total input tax benefit on any bill raised on it or company should bifercate input tax credit

Shyam Lal Naik

Shyam Lal Naik (Expert)
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09 June 2010 From the query, it appears that, the company is engaged in trading of coal(ie purchase and sale) as well as providing output services. You want to know, whether, the credit for various inputs and inpur services can be availed in full for discharging the Service tax Liability.

Similar question has been examined by the Ahmedabad bench of the CESTST recently. The Tribunal held that trading activity is neither manufacturing nor service. Hence there is no application of the rules regarding reversal of proportionate credit used for providing exempted service.

The tribunbal however also observred that, in such a scenerio, the credit should be appropriated. This portion of the judgment is not based on the service tax law/Cenvat Credit Rules and is likely to be challanged at higher judicial forum.

It can be concluded that, as yet, there is no clarity on this issue.