2010 (12) TMI 90 - AT - Service Tax

Cenvat Credit - Input Services - service tax paid on certification of pollution level - Held that - where service tax or Central Excise duty was paid on any service or any excisable goods, as the case may be, by the service provider or the manufacturer of the goods, as the case may be, CENVAT credit thereof would be admissible to the service recipient or, as the case may be, the manufacturer of the final product who has used the aforesaid goods as inputs in the manufacture of final products. The departmental authorities having jurisdiction over the service recipient / manufacturer of final products cannot sit in judgement over the taxability of the service or excisability of the inputs, which function belongs to the departmental authorities having jurisdiction over the service provider/input manufacturer. This settled position of law is squarely applicable to the present case. - Cenvat Credit allowed

Summary

Issues:
Whether the appellant is entitled to avail CENVAT credit of service tax paid on certification of pollution level during the disputed period.

Analysis:
1. The appellant, engaged in cement manufacturing, sought CENVAT credit for service tax paid on pollution level certification by agencies Vimta Labs Ltd. and Ashwamedh Engineers and Consultants. The department sought to recover the credit, contending that such services were not taxable. The original and appellate authorities upheld this decision, leading to the current appeal.

2. The appellant's Counsel argued that the lower authorities had no jurisdiction to determine the taxability of the service, citing case law precedent. The cases highlighted the availability of CENVAT credit even if the service provider paid the service tax. The Counsel emphasized that the service tax authorities at the provider's end were responsible for determining taxability.

3. The learned SDR argued that pollution level certification did not directly relate to cement manufacturing, thus not qualifying as an input service under CENVAT credit Rules. However, the Counsel contended that this issue was beyond the scope of the show-cause notice, relying on a Supreme Court case precedent.

4. The Tribunal accepted the Counsel's argument, noting that the show-cause notices did not question the certification as an input service. It emphasized that if service tax was paid by the provider, CENVAT credit should be admissible to the recipient. The Tribunal held that authorities at the recipient's end cannot decide on taxability, which is the service provider's jurisdiction.

5. The Tribunal rejected the SDR's argument, noting a direct connection between cement manufacturing and pollution. It concluded that the SDR's proposition was beyond the show-cause notice scope and not acceptable. Consequently, the impugned orders were set aside, and the appeals were allowed.