2015 (3) TMI 1062 - AT - Service Tax

Denial of Cenvat Credit - Assessee sent certain goods to the job workers for job work. The activity of the job worker was meant to manufacture, but the job worker was clearing the goods to the appellant without payment of duty but issuing service tax invoices to the appellant for payment of service tax on job charges - Held that - job worker has issued invoices for job charges on which the service tax has been paid by the job worker. It is also not in dispute that appellant has not received the job work goods. Therefore, appellant is entitled to take Cenvat credit on service tax paid by the job workers on job charges. The issue whether the activity of job worker amounts to the manufacture or not, the Revenue has not taken this issue with the job worker. Therefore, the appellant cannot be held liable for the activity of the job worker. As the appellant has suffered service tax on job charges, they are entitled to take Cenvat credit. Therefore, impugned order deserves no merits and hence it is set aside - Decided in favour of assessee.

Summary

Issues:
Denial of Cenvat Credit on service tax paid to job workers.

Analysis:
The appellant, a manufacturer of excisable goods, appealed against the denial of Cenvat Credit on service tax paid to job workers. The job workers, despite engaging in manufacturing activities, were clearing goods to the appellant without duty payment but issuing service tax invoices for job charges. The Revenue contended that the job workers' activities constituted manufacturing, thus disqualifying the appellant from claiming Cenvat Credit. A show cause notice was issued, leading to the impugned order confirming duty demand, interest, and penalty.

Upon hearing both parties and examining the submissions, it was established that the job workers had indeed paid service tax on job charges invoiced to the appellant, who had not received the job work goods. Since the Revenue did not contest whether the job workers' activities amounted to manufacturing, the appellant was deemed eligible to claim Cenvat Credit on the service tax paid by the job workers. Consequently, the appellant's liability could not be attributed to the job workers' activities, and the impugned order was deemed meritless and set aside. The appeal was allowed, with any consequential relief granted.

This judgment highlights the importance of examining the specific circumstances of service tax payments by job workers and the entitlement of manufacturers to claim Cenvat Credit based on such payments. The decision underscores the necessity for Revenue to establish a clear link between job workers' activities and the manufacturer's liability before denying Cenvat Credit.