Amit Gupta (Loosening Myself) (1508 Points)
06 September 2011
Can the company avail cenvat credit on service tax paid in respect of GTA reverse charge.Also the company has taken abatement in this case????
Please reply with reference to legal provisions.
CA Unnikrishnan Nair N
(Chartered Accountant)
(2083 Points)
Replied 06 September 2011
Credit has been correctly taken assuming that the service relates to inward transportation. Abatement is also correctly availed.
CA Prabhat Gupta
(Manager (Indirect Taxes))
(821 Points)
Replied 09 September 2011
Credit in case of GTA service is available only upto the place of removal and beyond that point no credit is available.
Please refer to point number 8.1.(b) & (c) of Circular No. 97 / 8 /2007
" (b) ISSUE: Whether a consignee can take credit of the amount paid as service tax either by himself (as consignee) or by the consignor or by the Goods Transport Agency?
COMMENTS: As per Rule 3 of the CENVAT Rules, 2004, CENVAT Credit of, inter alia, service tax leviable and paid on any ‘input services’ can be taken. The rule does not distinguish as to who (i.e. the GTA, the consignor or the consignee himself) has paid the aforesaid tax. The only condition required to be satisfied is that the consignee must be a manufacturer of excisable goods or a provider of taxable service and the service must be in the nature of ‘input service’ for such activity. In case of inward transportation of inputs or capital goods, such service (being specifically mentioned under the definition of ‘input service’) would qualify to be called as ‘input service’ and, thus, the service tax paid (by any of the persons mentioned above) on it would be eligible as credit to the receiver if he is either a manufacturer of excisable goods or a provider of taxable service.
(c) ISSUE: Up to what stage a manufacturer/consignor can take credit on the service tax paid on goods transport by road?
COMMENTS: This issue has been examined in great detail by the CESTAT in the case of M/s Gujarat Ambuja Cements Ltd. vs CCE, Ludhiana [2007 (006) STR 0249 Tri-D]. In this case, CESTAT has made the following observations:-
“the post sale transport of manufactured goods is not an input for the manufacturer/consignor. The two clauses in the definition of ‘input services’ take care to circumscribe input credit by stating that service used in relation to the clearance from the place of removal and service used for outward transportation upto the place of removal are to be treated as input service. The first clause does not mention transport service in particular. The second clause restricts transport service credit upto the place of removal. When these two clauses are read together, it becomes clear that transport service credit cannot go beyond transport upto the place of removal. The two clauses, the one dealing with general provision and other dealing with a specific item, are not to be read disjunctively so as to bring about conflict to defeat the laws’ scheme. The purpose of interpretation is to find harmony and reconciliation among the various provisions”.
Similarly, in the case of M/s Ultratech Cements Ltd vs CCE Bhavnagar 2007-TOIL-429-CESTAT-AHM, it was held that after the final products are cleared from the place of removal, there will be no scope of subsequent use of service to be treated as input. The above observations and views explain the scope of the relevant provisions clearly, correctly and in accordance with the legal provisions. In conclusion, a manufacturer / consignor can take credit on the service tax paid on outward transport of goods up to the place of removal and not beyond that."
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