Wrong availment of CENVAT Credit by Beer manufacturing units - DGST alerts
DIRECTOR General, Service Tax has informed the field that investigations revealed that a Beer manufacturing unit had discharged service lax liability on its output service namely 'franchise service' by utilizing CENVAT Credit taken on raw materials and packing goods used for manufacturing of alcoholic beverages. This unit was not eligible to avail CENVAT Credit on inputs and packing materials as their final product was alcoholic beverage for human consumption, which are not 'excisable goods' under the Central Excise Act, 1944.
The DGST further informs that as per Rule 6(1) of CENVAT Credit Rules. 2004, the CENVAT Credit shall not be allowed on such quantity of input used in or in relation to the manufacture of exempted goods or for provision of exempted services, or input service used in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provision of exempted services, except in the circumstances mentioned in sub-rule (2). Credit of the raw materials and packing materials would not be available for payment of service tax as those inputs were used in the manufacture of non-excisable goods. The total service tax liability detected on account of mis-utilisation of CENVAT Credit is substantial. On being pointed out, this unit has agreed to discharge service tax liability with interest.
DGST alerts the field that similar practice might be followed by various beer manufacturing units and others. DGST wants the field to take necessary action to safeguard the Government revenue in such cases.