AGARWAL SHRAFF & CO.

CHARTERED ACCOUNTANTS
52 Weston Street 5th Floor
KOLKATA – 700 012
PHONE: 22259194 (O), 98300 61359 (M)
e-mail: vshraff@hotmail.com

Sri R.K. Shah September 20, 2006

V.P. ( Commercial)
Birla Tyres
Shivam Chambers
53 Syed Amir Ali Avenue
Calcutta – 700 019

Dear Sir,

Sub: Opinion on cenvat credit on input services

As discussed with you, my opinion has been sought on the following issues for availability of
cenvat credit on input services:-
(i) Availability of cenvat credit on input services in a case where Bill is in the name
of the Birla Tyres & payment is also made by Birla Tyres;
(ii) Availability of cenvat credit on input services in a case where Bill is in the name
of the Birla Tyres but payment is made through Commission agent or C&F agent
or employee of Birla Tyres;
(iii) Availability of cenvat credit on input services in a case where Bill is either in the
name of Commission agent or C&F agent or employee of Birla Tyres and
payment is also made through Commission agent or C&F agent or employee of
Birla Tyres;
Issue i) - Availability of cenvat credit in a case where Bill is in the name of the Birla
Tyres & payment is also made by Birla Tyres
As per Rule 2(l)(ii) of Cenvat Credit Rules, 2004 defines “input service" means any service
used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture
of final products and clearance of final products from the place of removal,
and includes services used in relation to setting up, modernization, renovation or repairs of a
factory, premises of provider of output service or an office relating to such factory or
premises, advertisement or sales promotion, market research, storage upto the place of
removal, procurement of inputs, activities relating to business, such as accounting, auditing,
financing, recruitment and quality control, coaching and training, computer networking,
credit rating, share registry, and security, inward transportation of inputs or capital goods and
outward transportation upto the place of removal.

Further Rule 9 of the Cenvat Credit Rules, 2004 specifies the documents required to avail
cenvat credit. This Rule prescribes that an invoice, a bill or challan issued by a provider of
input service on or after the 10th day of, September, 2004; or an invoice, bill or challan
issued by an input service distributor under rule 4A of the Service Tax Rules, 1994 is the
document on the basis of which cenvat credit will be available to the manufacturer.
 AGARWAL SHRAFF & CO.
CHARTERED ACCOUNTANTS
52 Weston Street 5th Floor
KOLKATA – 700 012
PHONE: 22259194 (O), 98300 61359 (M)
e-mail: vshraff@hotmail.com

Rule 4A(1) of the Service Tax Rules, 1994 prescribes the information required to be
contained in the invoice issued by the service provider. It specifies that invoice should
contain the following information:-
(i) the name, address and the registration number of such person;
(ii) the name and address of the person receiving taxable service;
(iii) description, classification and value of taxable service provided or to be provided; and
(iv) the service tax payable thereon.
Rule 4A(2) of the Service Tax Rules, 1994 prescribes the information required to be
contained in the invoice issued by the input service distributor. It specifies that invoice should
contain the following information:-
(i) the name, address and registration number of the person providing input services and
the serial number and date of invoice, bill, or as the case may be, challan issued under
sub-rule (1);
(ii) the name, [and address] of the said input services distributor;
(iii) the name and address of the recipient of the credit distributed;
(iv) the amount of the credit distributed.
Hence in accordance with the provisions discussed above there is no ambiguity in availability
of Cenvat Credit in respect of input services where Bill is in the name of the Birla Tyres &
payment is also made by Birla Tyres.
Issue (ii) - Availability of cenvat credit on input services in a case where Bill is in the
name of the Birla Tyres but payment is made through Commission agent or C&F agent
or employee of Birla Tyres
Rule 4(7) of the Cenvat Credit Rules, 2004 specifies that the CENVAT credit in respect of
input service shall be allowed, on or after the day which payment is made of the value of
input service and the service tax paid or payable as is indicated in invoice, bill or, as the case
may be, challan referred to in rule 9.
However this Rule does place any restriction that the payment has to be made to the person
who has raised the invoice or bill. It is enough if the payment of invoice amount including
service tax is made to avail cenvat credit.

It was decided in the case of MAHADEV INDUSTRIES Versus COMMISSIONER OF

CENTRAL EXCISE, BELGAUM - 2000 (115) E.L.T. 452 (Tribunal) that ownership of input
is not necessary for claiming Modvat credit as long as it can be established that input has
been used for the purpose of manufacturing.
 AGARWAL SHRAFF & CO.
CHARTERED ACCOUNTANTS
52 Weston Street 5th Floor
KOLKATA – 700 012
PHONE: 22259194 (O), 98300 61359 (M)
e-mail: vshraff@hotmail.com

Hence in our opinion cenvat credit will be available in a case where Bill is in the name of the
Birla Tyres but payment is made through Commission agent or C&F agent or employee of
Birla Tyres.
Issue (iii) - Availability of cenvat credit on input services in a case where Bill is either in
the name of Commission agent or C&F agent or employee of Birla Tyres and payment
is also made through Commission agent or C&F agent or employee of Birla Tyres

Rule 9(2) of the Cenvat Credit Rules, 2004 provides that The CENVAT credit shall not be
denied on the grounds that any of the documents mentioned in sub-rule (1) does not contain
all the particulars required to be contained therein under these rules, if such document
contains details of payment of service tax, description of the taxable service, assessable value,
name and address of the provider of input service.
It has been further provided that, if the Deputy Commissioner of Central Excise or the
Assistant Commissioner of Central Excise, as the case may be, having jurisdiction over the
factory of a manufacturer or intending to take CENVAT credit, is satisfied that the duty of
service tax due on the input service has been paid and such input or input service has actually
been used or is to be used in the manufacture of final products, then, such Deputy
Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case
may be, shall record the reasons for not denying the credit in each case.
It appears from the analysis of above provision that what is important to avail cenvat credit is
the use of input or input service in the manufacture of the final product. Cenvat credit cannot
be denied merely on the ground of absence of any of the particulars required to be there in the
invoice as has been provided in the Rule 4A of the Service Tax Rules, 1994.
It was decided in the case of MODI XEROX FINANCIAL SERVICES LTD. Versus
COMMR. OF C. EX., CHANDIGARH - 2005 (191) E.L.T. 457 (Tri. - Del.) that Credit is not
deniable on the basis of Invoice not containing all requirements required to be contained.
Credit is not deniable for procedural lapses. Credit cannot be denied if Duty paid nature of
inputs and receipt thereof in appellants factory is not disputed.
In a case where Bill is in the name of employee of Birla Tyres and payment is also made by
the employee, the cenvat credit cannot be denied unless the services has been utilised by the
employee for his personal purpose and Birla Tyres is making reimbursement of the personal
expenditure of the employee as part and parcel of his salary. However if a expenditure is
incurred by the employee for and behalf of Birla Tyres than it can be easily established that
input service has been utilised by the Birla Tyres for the manufacture of the final product and
as such cenvat credit cannot be denied even if the Bill is in the name of employee.
However in case of the Bill being in the name of Commission Agent or C& F Agent, the
department can argue that the agent has utilised the input service in discharging his services
of the Commission Agent or C& F Agent and as such cenvat credit should be available to the
agent for discharging his liability of service tax on commission.
 AGARWAL SHRAFF & CO.
CHARTERED ACCOUNTANTS
52 Weston Street 5th Floor
KOLKATA – 700 012
PHONE: 22259194 (O), 98300 61359 (M)
e-mail: vshraff@hotmail.com

In view of the above discussion, in our opinion cenvat credit on the basis of a Bill which is in
the name of employee of Birla Tyres can be taken provided it can be established from the
underlying records, documents and circumstantial evidences that even though bill is in the
name of the employee but input service has been utilised for the purpose of manufacture of
the final product. However, in can of a Bill being in the name of the Commission Agent or
C& F Agent, cenvat credit should not be availed, as in our opinion it would be difficult to
establish that input services has been consumed by the Birla Tyres and not by Commission
Agent or C& F Agent.
Please feel free to contact the undersigned, if you need any further clarifications in this
respect.
A copy of the judgments cited above is enclosed herewith for your perusal and ready
reference.

Thanking You,

Yours faithfully,
For Agarwal Shraff & Co.
Chartered Accountants

(Vinay Kumar Shraff)

Partner