In your case, there does not seem to be any reason for disallowing CENVAT Credit. Where you are a manufacturer as well as a service provider and not claiming any exemption or Composite scheme, you are eligible to utilise CENVAT Credit. With the introduction of CENVAT Credit Rules, 2004 credit of Service Tax and Excise Duty across goods & services has been allowed. Ask the department people to refer to Rule 3 of Cenvat Credit Rules, 2004 as amended, relevant part produced below for reference:
3. CENVAT credit. - (1) A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of -
(i) the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act;
(ii) the duty of excise specified in the Second Schedule to the Excise Tariff Act, leviable under the Excise Act;
(iii) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act,1978 ( 40 of 1978);
(iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 ( 58 of 1957);
(v) the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001);
(vi) the Education Cess on excisable goods leviable under section 91 read with section 93 of the Finance (No.2) Act, 2004 (23 of 2004);
(via) the Secondary and Higher Education Cess on excisable goods leviable under section 136 read with section 138 of the Finance Act, 2007 (22 of 2007);
(vii) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv), (v) (vi) and (via);
(viia) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, Provided that a provider of taxable service shall not be eligible to take credit of such additional duty; (Clause (viia) has been inserted vide Notification No. 13/2005 - Central Excise (N.T.), dated 01/03/2005)
(viii) the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of 2003);
(ix) the service tax leviable under section 66 of the Finance Act; and
(x) the Education Cess on taxable services leviable under section 91 read with section 95 of the Finance (No.2) Act, 2004 (23 of 2004),
“(xa) the Secondary and Higher Education Cess on taxable services leviable under section 136 read with section 140 of the Finance Act, 2007 (22 of 2007); and
(xi) the additional duty of excise leviable under section 85 of Finance Act, 2005 (18 of 2005 ) (In clause (xi), the words and figures "section 85 of Finance Act, 2005 (18 of 2005 )" has been substituted vide Notification No. 22/2005 -Central Excise (N.T.), dated 13/05/2005) (Clause (xi) has been inserted vide Notification No. 13/2005 - Central Excise (N.T.), dated 01/03/2005)
paid on-
(i) any input or capital goods received in the factory of manufacture of final product or premises of the provider of output service on or after the 10th day of September, 2004; and
(ii) any input service received by the manufacturer of final product or by the provider of output services on or after the 10th day of September, 2004,
(4) The CENVAT credit may be utilized for payment of –
(a) any duty of excise on any final product; or
(b) an amount equal to CENVAT credit taken on inputs if such inputs are removed as such or after being partially processed; or
(c) an amount equal to the CENVAT credit taken on capital goods if such capital goods are removed as such; or
(d) an amount under sub rule (2) of rule 16 of Central Excise Rules, 2002; or
(e) service tax on any output service:
As a Service Provider you cannot utilise Credit of Additional Duty u/s 3(5), if any, for payment of Service tax, but could be utilised for payment of Excise Duty.
Hope now it is clear that credit utilisation is possible in your case.
CAclubindia
