Krishi Kalyan Cess
(KKC) at the rate of 0.5% is being imposed on all taxable services with effect
from 01.06.2016 on all taxable services provided or agreed to be provided by
the service provider. The revenue collected from this Cess will be utilised by
the government for improving agricultural sector and for taking initiatives to
promote agricultural activities. However, the complicated provisions enshrined
for this Cess tend to defeat the 'Kalyankari intention' of the government.
It is provided that
only a provider of output service shall be allowed to take cenvat credit of the
Krishi Kalyan Cess on taxable services leviable under section 161 of the
Finance Act, 2016. This has the consequence of raising doubt as regards
availment of cenvat credit of KKC levied on input services received by a
manufacturer cum service provider. Not only this, it is being provided that the
cenvat credit of any duty shall not be utilised for payment of KKC leviable
under section 161 of the Finance Act, 2016. In the opinion of authors, literal interpretation
of the provision leads to conclusion that only a service provider can avail the
cenvat credit of KKC imposed on input services availed by it and the credit so
availed can be utilised for payment of KKC and no other duty.
This means that a
manufacturer, who is a service provider as well, cannot avail the cenvat credit
of KKC at all on the input services received by it in the capacity of
manufacturer of goods and consequently, cannot utilise the same for payment of
service tax on output services provided by it. This interpretation depart from
the principle laid by number of judicial pronouncements which have concluded
that legitimately earned cenvat credit is available as a 'common pool' and
there is no one to one co-relation required for utilisation of cenvat credit
earned in the capacity of manufacturer towards payment of service tax in the
capacity of service provider. This ratio has been laid down in the following
decisions rendered by various Tribunals:-
♦
|
COMMISSIONER
OF C. EX., SALEM VERSUS V. THANGAVEL & SONS (P) LTD. [2015 (37) S.T.R. 144 (TRI. – CHENNAI)]
|
|
♦
|
C.C.E.,
COIMBATORE VERSUS LAKSHMI TECHNOLOGY & ENGINEERING INDUS. LTD. [2011 (23) S.T.R. 265 (TRI. – CHENNAI)]
|
|
♦
|
||
♦
|
FORBES
MARSHALL PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE [2010 (258)
E.L.T. 571 (TRI. – MUMBAI)]
|
|
♦
|
JYOTI
STRUCTURES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, NASIK [2012 (285)
E.L.T. 356 (TRI. – MUMBAI)]
|
However, it is also
worth noting that in the above cases, the availment of cenvat credit was not
conditional that only service provider can avail the cenvat credit of a
particular duty as is being done in the case of KKC. It is pertinent to mention
that a new sub-rule (1a) has been inserted in Rule 3 after sub-rule (1) which
specifically mentions that 'A provider of output service shall be allowed to
take cenvat credit of KKC on taxable services leviable under section 161 of the
Finance Act, 2016'. On the contrary, Rule 3(1) states that 'A manufacturer or
producer of final products or a provider of output service shall be allowed to
take credit (hereinafter referred to as the Cenvat Credit)…' which indicates
that the cenvat credit availed of the duties mentioned in Rule 3(1) whether
availed in the capacity of manufacturer or in the capacity of service provider
is available as 'Cenvat Credit'. In the opinion of authors, the above cited
judicial pronouncements will not have relevance in case of availment of cenvat
credit of KKC on input services availed by a manufacturer cum service provider
for use in or in relation to manufacture of final goods. Furthermore, when the
manufacturer cum service provider cannot avail the cenvat credit of KKC on the
input services used in manufacture of final goods, the question of utilisation
of KKC does not arise at all.
The above
interpretation poses a great difficulty on the assessees who are engaged in
manufacture and provision of services both. Say for example, a manufacturer of
machinery who is also engaged in providing services of installation,
commissioning and repair services. In such situation, the said assessee will be
receiving input services both for manufacture of machinery and also for
providing the services of installation, commissioning and repair services. In
such a case, it would be extremely difficult for the said assessee to maintain
separate records for input services used in manufacture of machinery so that no
cenvat credit of KKC is being availed on the same while maintain separate
records for input services used in provision of services such as installation,
commissioning and repair services and avail the cenvat credit of KKC. Moreover,
what about common input services availed by the said manufacturer-cum-service
provider. The assessee avails a number of common input services in the
manufacture/provision of service such as telephone services, Chartered
Accountant services, legal services, security services etc. The author wish to
highlight that in case of assessee who is engaged in manufacturing dutiable
goods and provision of taxable services, wherein it is not possible to
ascertain the cenvat credit of KKC pertaining to provision of taxable services,
whether the assessee will require to comply with the provisions of Rule 6 of
the Cenvat Credit Rules, 2004 even when no exempted services have been provided
or no exempted goods have been removed. It is pertinent to note that there has
been no amendment in Rule 6 to provide that the provisions shall apply in case
of manufacturer-cum-service provider with respect to credit of KKY availed on
common input services used in manufacture of dutiable goods and provision of
taxable services. The prudent assessees in such a situation will definitely
find it convenient to forgoe the cenvat credit of KKC instead of adopting a
complicated and tedious procedure of maintaining separate records.
No comments:
Post a Comment