Clarifications regarding Cenvat credit on input services availed in relation to capital goods - Service Tax - Facility Circular No. 1/2009

Clarifications regarding Cenvat credit on input services availed in relation to capital goods Facility Circular No. 1/2009 Dated 5-5-2009 Attention of the trade is drawn to Rule 6 of the Cenvat Credit Rules, 2004 , which imposes obligation to be fulfilled by manufacturers of dutiable and exempted goods and provide of taxable and exempted services. 2. It has come to notice that the manufacturers and service providers are under mis-conception, that as per rule 6 ibid does not impose any restriction in respect of taking credit on capital goods even if they manufacture final products or provide output service which are chargeable to duty or tax as well as exempted goods or services, they can avail full credit of service tax paid on input services such as GTA, Erection Commissioning, Maintenance, Insurance etc., availed in relation to the capital goods used in the manufacture or in providing the output service. In this regard, it is clarified that the Rule 6 restricts credit of duty paid on all inputs and credit or service tax paid on all input services irrespective of whether the input services are related to capital goods or otherwise. The only situation which attracts application of Rule 6 is that the manufacturer manufactures both dutiable and exempted goods and the service provider provides both taxable and exempted services. 3. The Trade Industry Associations are, therefore, advised to inform their members suitably on the applicability of the provisions of Rule 6 of Cenvat Credit Rules, 2004 in the situation discussed above.