Taken Cenvat credit of Service Tax on GTA service on the basis of Input Invoices(Excise) ., Service Tax

[nirmal dutta]

Respected Sirs,

Taking credit on the basis of Input Invoices(Excise) when service tax paid by the manufacturer-supplier on GTA service of inward transportation of goods upto factory.

The freight for transportation was paid to the transporter by the manufacturer-supplier of the goods and hence they paid service tax, too, on reverse charge mechanism. It was the outward transportation for them and thus the no question of taking credit of service tax so paid by them. But for us it was inward transportation of inputs and we are always to take credit of service tax so paid on inward transportation of inputs even if the said service tax is paid by the manufacturer-supplier as a result of making payment of freight to the transporter.

Sirs, In the above case Cenvat credit taken is wrong or irregular under any rules, notifications, circulars & any case law.

Thanks & Regards

nirmal

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Posts / Replies

[Ganeshan Kalyani]

Sir, what is proof that your supplier has not availed the Cenvat credit of the service tax paid by them on outward GTA under reverse charge. The department will analyse the case in this way. So you need to check the terms and conditions of the delivery of the goods as to whether the delvery is ex-factory or FOR basis. Both cannot avail the same credit. It will lead to litigation to either of the party into the transaction. Thanks.

[MUKUND THAKKAR]

Sir,

First of all your LR should be check if it is mention freght " Paid" if yes , than you have to ask you supplier to raise the invoice for GTA in favour of you, on the basis of the same you have paid the service tax for Inward -GTA and avail credit. freight charges and every things must be clear in purchase order. This is my view

I am also agree with the view of Shri Ganeshan Kalyani sir.

[JSW CEMENT LIMITED]

Sir,

In my opinion, once the service tax is paid by manufacturer supplier, the service is availed by manufacturer supplier, you cannot avail credit even on the invoice raised by the Manufacturer-supplier. The basic question is who has availed the service from the transporter. In this case the service has been availed by Manufacturer-supplier only and not you. The manufacturer-supplier can be said to have received the services of transporter as he arranges the transport for delivery of his goods to his purchaser.

[MUKUND THAKKAR]

Thank you sir for valuable inputs..

[nirmal dutta]

Sir, Manufacturer-supplier give a declaration that, "we have charged both freight and service tax thereon, in our sales Invoices(Excise), and we have not taken cenvat credit if the said service tax amount paid by us on GTA service."

Manufacturer-supplier delivered the materials FOR basis.

Manufacturer-supplier also declared that we have paid the freight as a consignor, service tax liability on GTA service is discharged by us as per reverse charge mechanism and Service tax on outward freight is paid through challans.

[JSW CEMENT LIMITED]

Sir,

Whatever declaration the manufacturer-suppliers gives, the basic issue would revolve around the point as to who is the service receiver. When the delivery term is FOR, it means that arrangement of transport, payment of freight every thing is in the scope of Manufacturer-supplier. Thus the service of GTA has been received by the manufacturer-supplier only and service tax credit if any, would be available to him only and not the consignee who has neither availed the service nor paid the freight amount to transporter.

Dear Experts, kindly correct me if I am wrong.

Regards,

V.Venkat Raman

[nirmal dutta]

Sir, Please read 1st para 2nd line

**we have not taken cenvat credit of the said service tax amount paid by us on GTA service

[nirmal dutta]

Sirs,
Buyer has paid to manufacturer-suppliers as per Invoice amount i.e. Material Basic value + Excise duty + CST + Freight + Service Tax + Insurance = Total payable.

[Rajagopalan Ranganathan]

Sir,

With due respect to views of experts, my view is as under:-

Rule 2 (d) (B) of Service Tax Rules, 1994 stipulates that " any person who pays or is liable to pay freight either himself or through his agent for the transportation of such goods by road in a goods carriage." In your case your consignor can be treated as your agent since you are reimbursing the freight and the service tax paid thereon. therefore as per above stipulation for all purposes of Service Tax Law and the Rules made thereunder you are paying the freight and the service tax leviable thereon and hence you are eligible to take the credit.

[Ganeshan Kalyani]

Sir, thanks Sri Rajagopalan Sir for your reply. Sir i would like to add that the manufacturer-supplier has paid service tax on GTA and has charged the same in his sales invoice. The service tax charges on invoice is a output service tax liability which he had collected from the buyer and paid to the Govt. Hence he cannot taken credit as the same is his output service and not input. On the other hand the recipient has paid the service tax of the amount charged on the invoice to the manufacturer-supplier which tends to be his input service and therefore eligible for credit in the hands of the buyer.

If the manufacturer-supplier is selling the goods on FOR basis then the liability of the freight cost and the service tax on the same lies upon him. The reverse charge mechanism notification does not provide that the recipient of service should collect the tax from the buyer and pay it to the Govt. In my view the liability of reverse charge has to be borne by the recipient out of his pocket only and cannot shift to the buyer.

In any case it is advisable to check the agreement and either of the party should take the credit. Thanks.

[JSW CEMENT LIMITED]

Ganesan Sir, here i would like to differ from your view. In service tax rules, other than ISD, there is no provision to pass on the service tax on rule 11 invoice. Further treating a service tax paid under section 68(2) of the Finance Act and passing on to the buyer as output service also does not seems to be correct. Here in the instant case, the buyer is reimbursing the service tax to the seller and in my view credit cannot be availed by the buyer as the seller is not providing any service to the buyer. The delivery of the goods is a part of sale and for such delivery the service of transportation has been availed by the seller.

Regards,

V.Venkat Raman

[Ganeshan Kalyani]

Sir, thanks for your clarification. Sir my concern is if the transport arrangement is done by supplier and the freight payment is also done by the supplier to the transporter then he may have recovered the freight amount and that why he is recovering the service tax amount paid by him (which under reverse charge is his liability in total). The point when he is charging in the invoice the service tax that he has paid doesn't it mean that he has passed the liability to the buyer. This is my thought.

However as I said in my previous reply that either of the party has to avail the credit. It should not happen that both the supplier and the buyer has availed the credit. Thus the agreement need to be checked thoroughly befor a call is taken. Thanks.

[JSW CEMENT LIMITED]

Ganesh sir, it is not mandatory that either of the parties has to avail stax. My only point is that for availing stax credit, service must have been recd. which is not the case here. The terms of the contract is FOR and by no stretch of imagination it can be said that seller has acted as a agent for payment of freight and stax. For availing stax the element of service recpt needs to be present. Further for availing stay either service invoice issued under the provision of rule 4A of service tax rules and in case of reverse charge it has to be challanding evidencing payment of stax from the regd. No. which is not the case here. This is my opinion.

Regards

V Venkat Raman

[KASTURI SETHI]

Sh.Nirmal Dutta Ji,

I intend to intervene. Suppose GTA is A. A transported the goods for delivery to B (Manufacturer-supplier) who paid the freight to GTA and paid ST. B supplied the goods to C. My question is 'Who has allowed manufacturer-supplier to act as GTA for passing Cenvat Credit to C by way of declaration-cum-certificate on the invoice raised by B to C ?

I go with Sh.V. Venkat Raman (JSW Cement Ltd.)

[nirmal dutta]

Respected Sethi Sir,

A is GTA

B is Manufacturer

B is Supplier

C is Buyer

Facts:

1) B as manufacturer sends Offer of materials to C

2) C sends Purchase order to B

3) B arranges Transporter & contact with A

4) A ready for delivery to C

5) B as a Manufacturer & Supplier dispatch the materials to C with Excise Invoice by A

5) A sends freight Bill to B

6) C makes payment to B as per Excise Invoice

Details of Invoice:

Basic Value + BED + CST + Freight + S.Tax + Insurance

Thanks & Regards,

nirmal

[KASTURI SETHI]

Sh.Nirmal Dutta Ji,

I have already understood the question. How and under what rule can B act as GTA ? B has received GTA service from A and paid the freight to GTA and also paid ST and thereafter B recovered freight from C. Such passing on freight ? When the service has been provided by A to B, the whole process is over. C may forward freight to 'D' and D may forward to E and so on and on.

I find legal force in V.Venkat Raman's reply.

[KASTURI SETHI]

Sh.Nirmal Dutta Ji,

Pl. peruse this latest case law.

2016 (8) TMI 310 - CESTAT MUMBAI = Dhanshree Ispat Versus Commissioner of Customs and Central Excise

 

[Ganeshan Kalyani]

Sir, Good morning Sri Kasturi Sir, there is full force in the case law cited by you. I must first of all appreciate for the valuable time you invested to fetch the cited case law.

The case law clarifies all the doubts of the query whether service tax paid by manufacturer but recovered from customers is eligible for set off in the hands of customer or not. The ground reason is being the tax paid by the customer to manufacturer is just a reimbursement and that manufacturer has not provided any service to the customer and in fact he has just shifted / recovered his tax outflow from the Customer. Thus the customer is not eligible for set off. Thanks

Sir, whether I have understood the citation aptly. Please validate. Thanks.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

Yes, Sir. You have grasped correctly (100%). But you will be stunned to know that virtually one of your replies is behind this. I have just traced out the judgement on the issue.