Cenvat credit

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CA Ajit Gajera

Practicing Chartered Accountants

124 Points Joined July 2008

Dear Friends,

I have a query regarding availment of CENVAT credit. One of my client is a leasing company. They import the machine from china and gives it on financial lease. As per lease agreement all import duty will be paid by company and after that lessee will reimbursee all the duty to our leasing company.

In this case actually import duty paid by lessee. Therefore, will end user gets the CENVAT credit of CVD @ 12%?????

Lessee is a manufacturer and paid regualar excise duty.

Thanks

Ajit Gajera

Replies (3)

CA Rishabh Goyal

CA Practice

28 Points Joined March 2013

The lessee is eligible for the availment of CENVAT credit on Import Duty paid on the machinery taken on lease:

As per Rule 4(3) of the Cenvat Credit Rules - Capital goods obtained on hire purchase, lease or loan agreement from a financing company are eligible for cenvat credit.

Also, as per "Leamak Healthcare P Ltd. v. CCE(2010) 259 ELT 554 (CESTAT)" it was held that - Cenvat credit will be available even if hire of machinery is by a non finance company.

Also, as per "Maruti Udyog v. CCE 2004 (165) ELT 226 (CESTAT)" it was held that - Ownership is not relevant for assessment of Cenvat credit.

CA Ajit Gajera

Practicing Chartered Accountants

124 Points Joined July 2008

Hi Rishabh,

- In this case what documents our compny should gives to lessee for availing CENVAT credit?

- Secondly, ownership of machinery remains with our compny till last installment, in this case hows and when invoice should be given to lessee?

Thanks

Ajit Gajera

CA Kapil Raichura

Accounts head

21 Points Joined February 2013

Originally posted by : Ajit

Hi Rishabh,

- In this case what documents our compny should gives to lessee for availing CENVAT credit?

- Secondly, ownership of machinery remains with our compny till last installment, in this case hows and when invoice should be given to lessee?

Thanks

Ajit Gajera

Dear Ajit,

For dat ur company need to give a copy of import/purchase invoice along with clearance of import duty proof to ur lessee and ur lessee will submit all these with a financial lease deed and then he shall be eligible to claim cenvat credit on import duty paid by your company