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Courier Service--Whether Input Service

P. Narayanan

A manufacturer avails of various services while carrying on its manufacturing activity. In the chain of allowing Cenvat credit, the manufacturer is eligible to avail of Cenvat credit of the tax paid in respect of service covered by the definition of input service as mentioned in rule 2(l) of the Cenvat Credit Rules, 2004. This article aims at dealing with admissibility of Cenvat credit of the tax paid on principally courier services to the manufacturer.

1. Introduction

Admissibility of Cenvat credit is an ever-burning issue in the context of manufacturers. Normally a manufacture has to carry out various activities for removal of goods, viz., transportation, courier, etc. The admissibility of the tax paid on the said activities is discussed in this article in the light of a recent case of CCE v. Ambalal Sarabhai Enterprises Ltd. 2016 (45) STR 174 (Guj).

2. Factual context

The assessee was a manufacturer and was using courier services and clearing agent services for bringing inputs into the factory and for transportation of finished goods from the factory. It was availing of Cenvat credit of the service tax paid on the courier services and clearing agent services. However, the departmental authorities were of the different opinion and they rejected the Cenvat credit so availed of by the assessee. It was the contention of the revenue that the said courier service providers and clearing agents took delivery of the finished goods from the factory and brought inputs into the factory. The services tax on the courier services paid to the clearing agents and courier service providers is not admissible as per rule 2(l) of the Cenvat Credit Rules, 2004. Therefore, Cenvat credit on the impugned services was denied and the demand was confirmed against the same.

3. Relevant provision

For understating the facts and legal position arising out of the said facts, it is necessary to understand the definition of the input service as specified in the Cenvat Credit Rules, 2004. The definition is reproduced hereunder:-

As per Rule 2(l):

Input service means any service-

(i) Used by a provider of output service for providing an output service, or

(ii) Used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal,

and includes services used in relation to setting up, modernization, renovation or repairs o

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