MITHUN KUMAR (CA) (28 Points)
30 September 2011Hi friends,
Whether following inputs are eligible for cenvat credit against the output service tax :
1. Furnace Oil used as input (as fuel for ship)
2. High Flash High Speed Deisel Oil used as input (as fuel for ship i.e.,dredger)
Thanks.
CA SUMiT PATWARi
(Chartered Accountant)
(1441 Points)
Replied 05 October 2011
The e/duty paid on these are ineligible for/as cenvat credit !!
Trupti Pawar
(BE, Final year icwai)
(34 Points)
Replied 05 October 2011
As per the Cenvat Credit Rules,
The light diesel oil, high-speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever.
MITHUN KUMAR
(CA)
(28 Points)
Replied 07 October 2011
Hi Trupti,
Whether inputs mentioned by me are covered by the definition of LDO, HSDO or Motor Spirit.
Thanks.
Trupti Pawar
(BE, Final year icwai)
(34 Points)
Replied 08 October 2011
Hi Mithun below are some Judgements made in court which will help u to understand in better way:
J U D G M E N T
(Judgment of the Court was delivered by Prabha Sridevan, J)
In this civil miscellaneous appeal, the following substantial question of law is raised for consideration. "Whether the CESTAT is right in allowing modvat credit of duty paid on inputs furnace Oil/LSHS used in the manufacture of exempted final products".
2.The assessee is the manufacturer of both Cotton yarn on plain reel hanks and Cotton yarn on cones/cheese. The Cotton Yarn on cones/cheese are cleared on payment of duty and the Cotton Yarn in plain reel hanks are exempted form the payment of Central Excise Duty. The assessee avails CENVAT Credit on Furnace Oil/LSHS oil which are used as fuel for both the dutiable and exempted finished product. The assessee was called upon to reverse the CENVAT credit to the extent of actual quantity of inputs used in the manufacture of exempted finished products and an order was passed against the assessee demanding CENVAT credit to that extent and penalty was also imposed. On appeal it was set aside and the same was confirmed by the Tribunal relying on Sub Rule (2) of Rule 6 of CENVAT Credit Rules, which reads thus:-
"Where a manufacturer avails of CENVAT credit in respect of any inputs, except inputs intended to be used as fuel , and manufacture such final products which are chargeable to duty as well as exempted goods, then, the manufacturer shall maintain separate accounts for receipt, consumption and inventory of inputs meant for use in the manufacture of exempted goods and take CENVAT credit only on that quantity of inputs which is intended for use in the manufacture of dutiable goods."
3.We find that in 2006-TIOL 30 HC-AHM-CX (COMMISSIONER OF CENTRAL EXCISE & CUSTOMS v. GUJARAT NARMADA FERTILIZERS CO., LTD.,), the Gujarat High Court has held in favour of the assessee on the question whether LSHS which was used for manufacture of fertilisers and chemicals, MODVAT Credit could be denied as follows:- "However, what is material is that in sub-rule (2) an exception is carved out in case of inputs intended to be used as fuel in other words, the necessity of maintenance of separate account or denial of credit cannot be insisted upon in a case where inputs are used as fuel by the manufacturer."
Similarly in 2008(221) E.L.T. 41 (COMMISSIONER OF C.EX. DELHI-IV v. SUPER AUTO (I) LTD.,), the High Court of Panjab and Haryana in the case of MODVAT credit, held as follows:- "Cenvat/Modvat Furnace oil used as fuel Whether credit on inputs under Rules 57C and 57CC of erstwhile Central Excise Rules, 1944 used in both dutiable as well as exempted goods is admissible when neither separate accounts maintained nor 8% of price reversed Modvat credit availed on furnace oil used in production of own final products as well as for jub work articles cleared without payment of duty and without reversing proportionate credit Rules 57C(2) and 57C(2) ibid showing that Rule 57CC(1) ibid not applicable when inputs are intended to be used as fuel Furnace oil used as fuel in the present case Tribunal's order is sustainable Section 35G of Central Excise Act, 1944 Rule 6 of Cenvat Credit Rules, 2004 appeal dismissed."
4. Therefore where the inputs are intended to be used as fuel, the manufacturer is not obliged to maintain separate accounts. It is for this reason that both the Appellate Authority and the Tribunal held that in case of inputs which are used as fuel for the manufacture of both duty paid and non-duty paid products, no recovery could be made.
CA SUMiT PATWARi
(Chartered Accountant)
(1441 Points)
Replied 10 October 2011
I understand that, since you are talking about "output service tax" it is the case of an outpur service provider.
And in case of an output service provider cenvat credit can be taken only in respect of service tax paid in respect of services (input services) provided to the output service provider and not on any other materials consumed in the course of providing output service.
Correct me if I am wrong.
Raghav Bharadwaj
(ICWAI, final)
(286 Points)
Replied 11 May 2012
25 Hours GST Scrutiny of Return and Notice Handling(With Recording)
CAclubindia
