Cenvat credit on ser tax 2 units - reg, Central Excise

[venkat eswaran]

Dear all

We have two units one is in own premises and Main unit another is leased premises and second unit.

For leased unit-2 we are paying lease chrgs for land and machineries. That service tax credit we availing in unit-1 since bill is in the unit-1 (Main) address and pmt is made from unit-1 only.

Now the Excise audit has come in unit-1 and disallowed that service tax on lease chrges and they said we have to take credit in unit-2 only not in unit-1 asked to reverse the credit with interest.

What the audtitors said is ok? There is no revenue loss to government. unit -2 is separate range and division.

Auditors also said u can pay the the total ser tax whatever availed in unit-1 and take credit in unit-2 now.

Unfortunately we have closed that unit-2 three months back and shifted to other place that is another range. So we cannot take credit in unit-2 now that RC surrendered already

What we can do for this? Whether audit point is ok or we can contest this?

Please give your expert suggestions on this

Thanks in advance

Venkat

Posts / Replies

[Rajagopalan Ranganathan]

Sir,

You had paid service tax on lease rent in respect of unit-II but availed the same in Unit-I which the audit objected and asked you to reverse the same with interest. It appears that audit objection is correct and the same cannot be contested. The credit reversed by you cannot be availed by unit-II since it is closed now and credit will be treated as lapsed.

[Ganeshan Kalyani]

Yes, I too agree with Sri Rajagopalan Sir's views. Thanks.

[KASTURI SETHI]

I agree with both experts. In such case there is no provision for re-credit or refund in cash. At present, you are no more assessee of the department. However,there is one judgement which can be helpful to you.Issue is different but it is a fact that you are unable to re-take the credit because of closure of the factory. If the amount is paltry, ignore it. If the amount is huge, you must fight for your right. Chances are 50 : 50. If you do not fight it legally, you have lost the case today itself.

COMMISSIONER OF CUS. & C.EX., MEERUT-I Versus APCO PHARMA LTD. 2015 (319) E.L.T. 641 = 2011 (10) TMI 38 - UTTARAKHAND HIGH COURT

[Ganeshan Kalyani]

Yes, we should fight if the amount involved in substantial and it is meager then should leave the case. Thanks.

[surya narayana]

Dear Venkat ,

While fully concurring with the views expressed by all the learned friends, I feel, this was a transaction of availing the credit in one unit instead of other. The fact remains that the amount of service Tax charged by the property owner is paid by your company having two different units and you have legitimate right of availing the same as credit but for wrong availment you are not supposed to forgo the amount.

Hence, I feel reverse the said credit with interest ( if the same is utilized by you in the unit-1) and inform the Department about the same and aslo mention that you would be claiming refund of such reversed credit by filing a seperate refund claim from the company point of view. You will certainly win the case since the issue is genuine.

Regards

Suryanarayana

[venkat eswaran]

Dear Sirs

Thanks for your all reply.

If we pay for the last one year ser tax credit around 1.8 lakhs and can we claim refund from unit-2 the same amount by filiing revised ER-1 return or Thro' Letter?

Is it possible after surrendering RC to get refund amount? Or that excess credit can we able to transfer to unit-1 by certification from unit-2 AC/DC stating that this credit has not been utilized so we can transfer to unit-1 and with the consent to unit-1 AC/DC can we take this credit in unit-1?

Pl share your expert views on this

Thanks in advance

Venkat

[Ganeshan Kalyani]

Experts have clarified your query in all aspects. Please go though those replies again and the case law in details which will help you to take up the matter to resolve. if the amount is substantial then appointing a consultant is better. You may call the above experts, who have tremendous knowledge ,in their number who are always there to help you out by charging nominal fees. Thanks.