Availing of Cenvat credit on service tax paid to various service providers

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: We have recently started the manufacture of glass bottles at our manufacturing facility in Haryana, and are paying excise duty for that purpose. We have our head office in Delhi. Various taxable services are received at the Delhi office, such as chartered accountant’s service, management consultant’s service and cleaning activities among others. However, no taxable services are provided from the office, and it is unable to avail of Cenvat credit on the service tax charged by various service providers. Is there any mechanism by which the credit can be utilised by our company?

Under service tax laws, it is possible for the office of a manufacturer of excisable products to distribute input services to the manufacturing unit. For this purpose, the manufacturer is required to obtain service tax registration as an ‘input service distributor' (ISD) in respect of such office premises. Under this mechanism, the office premises registered as an ISD would receive invoices in respect of procurement of taxable services, and would be eligible to issue an invoice, bill or challan for distributing the credit of the service tax paid to the manufacturing facility. The manufacturing facility could then avail of Cenvat credit of service tax paid at the head office and distributed through such a mechanism. Accordingly, in your case, the head office receiving taxable services may be registered as an ISD, which could then transfer credit of the service tax paid to the manufacturing facility in Haryana.

We are a company engaged in the manufacture of footwear at our factory in Ghaziabad from where the goods are usually sold to customers. We have recently opened a warehouse in Delhi, and certain quantity of goods is now transferred from the factory to the warehouse, from where they are finally sold. In this regard, we have been paying excise duty at the factory gate on the value at which the goods are dispatched to the warehouse, but have been informed that such a method of valuation is incorrect for excise duty purposes. Please advise.