@ Nayan

Though they have capitalized and taken credit, but i don,t think its perfect as per rules,

incidents when service tax is capitalized that means manufacture of any new capital good, with either cenvated input or duty paid input+ taxable service, and capitalizing the same. in that case the excise duty burden goes on the person who is responsible for this manufacture, and ultimate the assessee would be charged with the excise burden of so manufactured good, ( without input credit, as the time would elapse by that time) service tax credit would also be accounted to his account to set off the excise duty liability for said capital goods.

putting a few line details of the transaction would fetch more fruitful results, but who bothers!!

No issue if the same pass with the audit program of department, but if barrise comes, ten it would generate a big mess to the assesee.

Ordinarily, the cost of installation and erection (which are in the nature of services) should not be capitalised and it should be expensed in P & L. In that case, 100% cenvat credit of the service tax paid to the service recipient can be claimed as credit - in a year in which capital goods were bought - (that is in a single year, 100% cenvat is allowed and in the first year itself) - .There is no bar of not more than 50% in a first year in case of availment of cenvat credit on input services - Let's be clear on this.

Second, if the cost of services of erection and installation is capitalised, then, no cenvat credit can be taken to the extent of depreciation claimed. Ordinarily, these costs are not be capitalised, but circumstances may demand so and it also depends on the company's policies and time taken for commercial production of output goods/services.

I always suggest my clients not to capitalise and claim 100% cenvat credit.

Any different views?

The conditions for allowing CENVAT Credit :--- 

               I) The CENVAT credit in respect of inputs may be taken 
                   immediately on receipt of the inputs in the factory of the 
                   manufacturer.

              II (a) The CENVAT credit in respect of capital goods received in a 
                       factory at any point of time in a given financial year shall be taken only for an amount not exceeding fifty per cent of the duty
                       paid on such capital goods in the same financial year. 

             II (b)  The balance of CENVAT credit may be taken in any financial 
                       year   subsequent to the financial year in which the capital 
                       goods were received in the factory of the manufacturer, if the 
                       capital  goods, other than components, spares and 
                       accessories, refractories and refractory materials and goods 
                       falling under heading No. 68.02 and sub-heading No. 6801.10 
                       of the First Schedule  to the Tariff Act are in the possession 
                       and use of the manufacturer of final products in such
                      subsequent years.

             III) The CENVAT credit in respect of the capital goods shall be 
                  allowed to a manufacturer even if the capital goods are acquired 
                  by him on lease, hire purchase or loan agreement, from a 
                  financing company.

            IV)  The CENVAT credit in respect of capital goods shall not be 
                   allowed if the manufacturer claims depreciation on that part of the 
                   value of such capital goods that represents the amount of duty on
                   such capital goods.

           V)  The CENVAT credit is allowed even if any inputs or capital goods 
                  as such or after being partially processed are sent to a job worker 
                  for further processing, testing, repair, re-conditioning or any
                 other purpose subject to the condition that the goods are received 
                 back in the factory within one hundred and eighty days of their 
                 being sent to a job worker.  If the inputs or the capital goods are
                 not received within one hundred and eighty days, the manufacturer 
                 shall pay an amount equivalent to the CENVAT credit taken.  But 
                 the manufacturer can take the CENVAT credit again when the
                 inputs or capital goods are received back min his factory.

          VI) The Commissioner of Central Excise having jurisdiction over the 
                factory of the manufacturer of final products who has sent the inputs 
                or the partially processed inputs to a job worker may allow final
                products to be cleared from the premises of the job worker subject 
                to such conditions he may impose in the interest of Revenue 
                including the manner of payment of duty.  

As per Rule 3 of CENVAT Credit rules - A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit(hereinafter known as CENVAT credit) of service tax leviable under section 66 of Finance Act paid on any input service received by the manufacturer of final products or a provider of output service.

Installation service is treated as input service and hence whole of credit can be availed on or after the day on which invoice is received.

Dear Alok and all,

The Rule 3 of Cenvat Credit Rules, 2004 has been amended by Finance Act, 2011. After the clause which allows cenvat credit of service tax paid on input services per Section 66, another clause has been added allowing cenvat credit of service tax paid under section 66A. Though there was a circular clarifying on the point, the Department of Service Tax was raising issues on this unnecessarily.

Is Service Tax Paid on Commission for Purchase of Second hand Car is eligible for Cenvat Credit. My client is providing Business Aux services

Is Service Tax Paid on Commission for Purchase of Second hand Car is eligible for Cenvat Credit. My client is providing Business Aux services

Sir,