Mobile bills qualify for Cenvat

CHATROOM

The 2004 circular on Cenvat clarifies that tax credit can be claimed on all input services.

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Can we take Cenvat Credit of the service tax that we pay on mobile phone bills? If so, can we take full credit or only a part?

You can take credit for any service tax paid on any input service used for providing a taxable output service or used directly or indirectly, in or in relation to the manufacture of final product and clearance of final product from the place of removal, including several activities that are listed in the definition of 'input service'

A confusion regarding credit of service tax paid on mobile phone services prevails because the Central Board of Excise and Customs (CBEC) has not withdrawn its circular no. 59/8/2003-ST dated 20.06.2003 in terms of which the credit of service tax paid on mobile phone services was denied.

That circular was issued when Service Tax Credit Rules, 2002 were in force and the said Rules specifically denied credit of service tax paid on mobile phone services.

The said circular is no more relevant as the new Cenvat Credit Rules, 2004 do not deny the credit of tax paid on mobile phone services but allow credit on service tax paid on any 'input services'.

So, you have to only determine whether the mobile phone service that you have used meets the definition of 'input service' given in sub-rule (l) of Rule 2 of Cenvat Credit Rules, 2004. If you meet the criteria given in the definition, you can take the credit.

We want to send a machine imported about five years back to the supplier manufacturer, as it is not usable in its present state. The supplier is willing to make some payment for the same. The supplier says that he may be able to remake the machine and sell it to us. Do you see any difficulty?

There is no problem in sending the machine to the supplier or for that matter any other party against payment that represents the value of the machine in its present form.

You cannot, however, get any duty drawback of the duties paid earlier as any drawback under Section 74 of the Customs act, 1962 is available only if the re-export takes place within three years from the date of import.

As per the latest Foreign Trade Policy, imports of re-manufactured goods are restricted. So, when you import the machine after it is re-made, you will need a license to clear the re-manufactured goods. For getting the license, you have to apply to the Director General of Foreign Trade.

The other problem could be the valuation of the imported goods. The Customs may find that your transaction value alone may not be enough to determine the value for purpose of charging duty. It would be better if you back up your invoice value with a Chartered Engineer certificate that shows the value and the basis of valuation.

The import duty rate will be the same as for import of any new capital goods.