Query is: Whether the Excise Duty paid on this purchase can be used for set-off against Service Tax payable on the Royalty ??
The pvt ltd company in question has taken rights/ sub-license from the individual ( who is also the promoter of this pvtl ltd co) who is inventor and registered owner of the patent of a unique technique to harvest rainwater. The implementation of techique requires one material component that is a special made PVC Sheet. This special PVC Sheet is a part of the design of the technique without which the structure made by use of this patented technique is incomplete.
The company will be paying Royalty to the individual=patent holder on which Input Service Tax is chargeable. Secondly the company will be buying this Special PVC Sheet on which Input Excise Duty is chargeable.
Now the company is appointing Franchisees at various places. The Franchisees will do the actual execution of Work / structure by using the patent technique and the special PVC Sheet.
The Company will be billing the Franchisee by two seperate bills or a single bill for two items i.e (1) Royalty for patent for per unit structure = Rs. 8000 on which Service Tax is chargeable @ 10.3%; (2) A special PVC Sheet for per unit structure =Rs. 2500 on which MVAT is chargealbe @ 4%.
I hope the detail given will help the friend/ experts to give a more reasoned opinion.
