Service tax paid as recipient of service is eligible for CENVAT Credit – Board clarifies again.
Services provided from outside India and received in India are subjected to levy of service tax under Section 66 A of the Finance Act and the liability to pay service tax is on the recipient of the service. The question is whether CENVAT Credit is available for service tax paid on such services by the recipient of the services.
Even after clarifying vide para 4.2.13. of C ircular F.No B1 /4/2006- TRU dated 19 th April, 2006 that C ENVAT C redit is allowed on such services, it appears the field formations have no respect for the said instructions as the industry associations have brought it to the notice of the Board that a view contrary to the above is taken by the field formations.
How dare the field take a view contrary to the Board's? But that is the Revenue Department for you! Why has the Board not called for a report on the officers who have taken such a contrary view and why are they not punished for blatant disobedience of the Board?
But the Board has now reiterated the contents of the TRU letter dated 19 th April 2006, that:
The recipient of the service is required to pay service tax under Section 66A though the service is actually provided not by the recipient but by a person located in a country other than India . Such taxable services, not being actually provided by the person liable to pay service tax, are not treated as “output services” for the purpose of C ENVAT C redit Rules, 2004. However, service tax paid under Section 66A is available as “input credit” under CENVAT redit Rules, 2004 provided the said services are used as input services by the manufacturer or producer of final products or a provider of output taxable service.
DDT has learnt that the CENVAT Credit is denied on the services received from outside India not on any of the grounds feared by the Board, but based on some strange ground. Rule 3(ix) of the CENVAT Credit Rules 2004 reads as:
(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 -
xxx
xxx
(ix) the service tax leviable under section 66 of the Finance Act; and
So, a manufacturer or service provider is allowed to take credit of service tax leviable under Section 66 of the Finance Act, but not service tax payable under Section 66A of the Finance Act, 1994 .
So, even on this latest Circular, a view contrary to the above will be taken by the field and the credit will be denied. The field formations and the trade and industry associations will again have to represent to the Board.
Disobedience of the Board has almost received legal status having gone unchecked for years!
And this re clarification is not by a Circular, but by a private letter addressed by an Under Secretary to the DGST. Like the GTA Circular, why can't the Board issue a Public Circular?
Please find a more detailed article on the issue in our ST se GST Tak.
CBEC Letter in F.No. 345/1/2008- TRU Dated 27 th June 2008