Captive Consumption


Hi All,

I wanted to know if there is any concept of captive consumption in service tax.

FACTS: 

This relates to a situaion where one legal entity (Say XYZ) renders two  taxable services one of commercial or industrial construction and another renting of immovable property. In order to let out immovable property, XYZ construct an immovable property for themselves and avail cenvat credit of the duty / tax paid on inputs and input services. Post completion of the construction of immovable property, rent out the immovable property and discharge service tax liability by adjusting the cenvat credit availed. 

I am aware that the Delhi High Court has held that in renting there is no value add and it is only services in relation to renting thatis taxable. I am also aware of the retrospective amendment deeming the activity of renting to be a taxable service. Be advised.

I now want precedents, if any one is aware.

 

Best regards

Anirudha R J Nayak

Advocate

 
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Advocate

Since one cannot render service to oneself, the question of captive consumption in regard to services is inconceivable.

 
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B.com

Two separate persons are required in order to bring the charge under Service Tax Law. the service receiver and the provider of taxable service should be the separate persons. one can not provide service to himself.

 
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Kindly appreciate that XYZ engages a contractor to get the immovable property constructed.

 

Kindly do not go by wha has been stated by the above two persons. It is my belief that these two people have not understood the query.

 

Regards

ARJN

 
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Advocate

Dear Arjn,

Please clarify certain things.

(1) It is you who posed the query as to whether the concept of 'captive consumption' is available in regard to Service tax?  I hope you will agree that the concept of 'captive consumption' means the producer himself consumes.  That means the service provider himself consumes the service.

(2) Nowhere in your query you have stated that  "XYZ engages a contractor to get the immovable property constructed."  This you are stating only now. 

(3) In fact you very clearly stated in your first query as under: "one legal entity (Say XYZ) renders two  taxable services one of commercial or industrial construction and another renting of immovable property. In order to let out immovable property, XYZ construct an immovable property for themselves. 

Now you go to the extent of saying "It is my belief that these two people have not understood the query."

I leave it to the members of the FORUM to draw their own conclusions, whether we understood your first query correctly or not.

 
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Advocate

For the just information of  Forum Members,

I also received the following PM from Mr. Anirudha R J Nayak, which I saw after posting the above reply.

 

Subject : Captive Consumption
Message :
I totally disagree with you. Because the question if understood properly is not on rendering of any service but on availment of cenvat credit. So i would appreciate if you have anything to say on this and abstain from giving your opinion on an unconnected issue. What if the construction activity is undertaken by a contractor employed by XYZ? Ponder on this. rEGARDS
From : Anirudha R J Nayak
 
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B.com

i would like to show the comment given by anirudha, in my PM box.

Dear Mr. Khan, I do not desire to thank you because, your answer is totally unconnected with the Question I asked. Kindly understand the question before you arrive upon a conclusion. Understand that the question relates to cenvat credit and not on rendering of any service. If what you state is correct than answer me this why dose'nt the same concept apply to Central Excise, because the concept of sale and service envisage two seperate legal entities. Would appreciate if you have anything to state on the query asked and abstain from giving your valuable opinion on unconnected issues. Regards Anirudha

 
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B.com

u had asked that is there any concept of captive consumption in Service Tax?

if you would have knowledge of Excise and customs then u would have understood what i meant to say.

first of all Captive Consumption means "goods manufactured by one unit/factory/branch are consumed by another unit/factory/branch of the same assessee for any purpose.

Mr. Ramachandran has correctly pointed out you, in fact i am not feeling like answering you as u have no manners to speak.

 
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