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Whether Cenvat Credit of CVD paid on imported Capital goods is admissible or entitled to output service providers. - Service TaxExtract Sir, Recently, audit was conducted to my friends firm providing taxable services, audit team objected of taking cenvat credit of CVD paid on imported capital goods supplied by registered dealer and citing that second proviso to Sub rule 2(a) of Rule 4 of the Cenvat Credit Rules, 2004 stipulates that the cenvat credit of the additional duty leviable under sub-section (5) of Section 3 of the Custom Tariff Act , in respect of capital goods shall be allowed immediately on receipt of the capital goods in the factory of a manufacture. As per my understanding, it should be read harmoniously as sub 2(a) of the said Rule clearly says that the Cenvat credit in respect of capital goods received in a factory on in the premises of the provider of output service at any point of time in a given financial year shall be taken only for an amount not exceeding 50% of the duty paid on such capital goods in the same financial year. In fact, firm has taken only 50% of the credit in respective financial year. It appears that the above lines specifically allows credit to provider of output service also. Please throw some light on this issue with supportive case laws, circulars, clarifications, etc. by Boards, if any.
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