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Input credit

Sat (VP) (45 Points)

23 August 2012

Dear Friends,

My Company is into Engineering, Procurement, Construction and Erection of power plants to clients who are manufacturers /service providers and intend to use the power generated internally. My query is in such cases, whether the client is entitled to Input Credit while paying Excise Duty/Service Tax on the Service Tax/Excise/Customs Duty paid to us and if so to what extent.

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2 Replies

CA. Subhash Dangi (Chartered Accountant) (1784 Points)
Replied 23 August 2012

UNDER THE CENVAT CREDIT RULES, 2004, THE CREDIT OF FOLLOWING DUTIES/TAX IS ALLOWED

(i) The duty of excise specified in the First Schedule to the Tariff Act, leviable under the Act;

(ii) The duty of excise specified in the Second Schedule to the Tariff Act, leviable under the 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), as amended by section 169 of the Finance Act, 2003 (32 of 2003) which was amended by section 3 of Finance Act, 2004 (13 of 2004);

(vi) The Education Cess on excisable goods leviable under clause 81 read with clause 83 of the Finance Bill (No. 2), 2004, which by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931 (16 of 1931), has the force of law;

(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) and (vii) above;

and (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. (viii) The additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of 2003).

(ix) The service tax

(x) The education cess on service tax paid on the input or capital goods or input services received on or after 10-9-2004.

THE CENVAT CREDIT MAY BE UTILISED 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

(d) an amount under sub-rule (2) of rule 16 of the Central Excise Rules; 2002

(e) Service Tax on any output services: Provided that while paying duty, the CENVAT credit shall be utilised only to the extent such credit is available on the last day of the month for payment of duty relating to the month.

W.e.f. 1-3-2008 Goods Transport Agency are not considered "output service provider" and cannot utilise CENVAT credit for the service tax paid on their other inputs and hence have to pay service tax on value of services after abatement of 75%.