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Cenvat Credit on Renting of Motor Vehicle-An issue gone unnoticed

Service Tax - By: - Akash Deep - Dated:- 2-2-2017 Last Replied Date:- 3-2-2017 - Budget 2017, being presented in the backdrop of demonetisation and high hopes of implementation of GST at the earliest, has neglected various issues which very well deserves the attention of legislature. Eligibility of Cenvat Credit on service of renting of motor vehicle is one such issue where credit availed on such service has always denied by the Revenue on the ground that motor vehicles involved in provision of .....

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use. As per the exclusion clause, service of renting of motor vehicle, where the motor vehicle does not qualify as capital goods, shall be excluded from scope of input service . From a harmonious reading of the exclusion clause B to the definition of input service along with definition of capital goods vis a vis motor vehicle, it emerges that services received by way of renting of motor vehicle would be treated as input service if same has been provided by service provider using a motor vehicle .....

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dopted a view that services pertaining to renting of motor vehicles would qualify as input services only if the motor vehicles qualify as capital goods in the hands of service recipient. As a result of the above erroneous interpretation, the service recipients comprising corporate offices, manufacturing units and other offices availing the service of renting of motor vehicle for transportation of their employees to office and back home, could not avail Cenvat Credit in respect of the said servic .....

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this case, the Cenvat Credit of service tax paid on the service of renting of motor vehicle was availed by the revenue and same was denied by the revenue on the ground that motor vehicle must qualify as capital goods in the hands of service receiver. While deciding the issue in favour of appellant, the Tribunal observed that the interpretation adopted by the Revenue is flawed as motor vehicle involved in provision of services by way of renting of motor vehicle can never be capital goods to the .....

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is self-defeating. It is axiomatic that if a person who owns certain motor vehicle registered in his name and use them for transportation of its own employees for business purposes, the whole transaction would reduce in to self-service and self-service can never qualify as service. When transaction does not qualify as service itself, question of taking Cenvat Credit does not arise at all. Further, the interpretation adopted by the Revenue imposes a condition that the motor vehicle used for prov .....

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be simultaneously registered in the name of the service recipient. Further, it cannot be assumed that the law (i.e. CCR) would require the service recipient to perform an impossible task or satisfy an impossible condition for enabling him to take the credit of the input services pertaining to renting of motor vehicle. The legal maxim Lex non cogit ad impossibilia- ( the law does not compel a man to do what he cannot possibly perform ), has been accepted by Courts in plethora of cases. Applying t .....

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