2015 (11) TMI 1588 - AT - Central Excise

Denial of CENVAT credit - job worker/ service provider on crossing charges of iron ore undertaken in its factory - whether the denial justified on the ground that the quantity of iron ore actually sent from the factory to the job worker were not received after its crossing by the job worker - Held that - Sub-rule (1) of Rule 3 is enabling provision, which entitles a manufacturer to take cenvat credit on input, capital goods and input services received by the manufacturer of final product. In case of input service, the requirement is that the same has to be received by the manufacturer of final product. Since, with regard to the taxable service, no provisions exist in the statute that the services have to be received in the factory of the manufacturer, I am of the opinion that cenvat credit can only be taken on the actual amount of service tax paid by the service provider, which in the present case is the job worker. The service being not tangible, it is not ascertainable as to how much service is attributable to the goods actually received in the factory after completion of the job work process. Service tax paid on the job charges is available to the appellant and the cenvat credit is not required to be reversed, in the eventuality, where lesser quantity of goods received in the factory after completion of the job work activity - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
- Availment of cenvat credit on input service tax paid by the job worker
- Denial of cenvat credit by Central Excise Authorities based on quantity discrepancies
- Interpretation of Rule 3 of the Cenvat Credit Rules, 2004 regarding cenvat credit on input services
- Applicability of sub-rule (5) of Rule 3 to input services
- Adjudication of the appeals against the Central Excise Authorities' decision

Analysis:

The appellant, engaged in the manufacture of sponge iron, availed cenvat credit on input service tax paid by the job worker for crossing charges of iron ore undertaken in its factory. The Central Excise Authorities denied the cenvat credit, arguing that since the quantity of iron ore sent from the factory was not fully received after job work, the appellant was not entitled to the credit. Appeals against this decision were taken up by the Id. Commissioner (Appeals), who upheld the cenvat demand, leading to the present appeal before the Tribunal.

The Ld. Advocate for the appellant argued that as per sub-rule (1) of Rule 3 of the Cenvat Credit Rules, input service received by the manufacturer of the final product allows for cenvat credit. He emphasized that the embargo in sub-rule (5) of Rule 3, which requires reversal of credit when goods are removed from the factory, does not apply to input services. On the contrary, the I-du DR for the Revenue reiterated the findings of the impugned order.

Upon hearing both sides and examining the records, the Tribunal analyzed the provisions of Rule 3. It noted that while goods must be physically received in the factory for input or capital goods, input services need only be received by the manufacturer of the final product. The Tribunal highlighted that since services are not tangible like goods, the exact amount of service attributable to the goods received after job work is not easily determinable. Therefore, the Tribunal concluded that the service tax paid on job charges should be available to the appellant, and there was no requirement to reverse the cenvat credit even if a lesser quantity of goods was received after job work.

In light of the above analysis, the Tribunal found no merit in the impugned orders and allowed the appeals filed by the appellant.