2009 (1) TMI 133 - AT - Service Tax

M/s. Star Security & Employment paying service tax on the cleaning services being provided by their sister concern M/s. Star Professional Services. Subsequently, when the Deptt. objected to taking Cenvat credit on the basis of invoice of M/s. Star Professional Services on the ground that the Star Professional Services do not have service tax registration and had not paid the service tax, M/s. Star Professional Services took separate service tax registration and subsequently paid the entire tax again along with interest - no ground for denial of the Cenvat credit on invoice/TR-6 challan of Star Professional Service

Summary

Issues:
Service tax demand confirmation under Rule 15 of Cenvat Credit Rules based on invoice validity.

Analysis:
The appeal challenges the confirmation of service tax demand of Rs.1,03,995/- with interest and penalty under Rule 15 of the Cenvat Credit Rules by the Commissioner (Appeals). The dispute arises from the Appellant, a manufacturer of automobile parts, receiving industrial cleaning services from M/s. Star Professional Services without service tax registration. Although M/s. Star Security & Employment took responsibility for paying the service tax, the Department objected to the Appellant claiming Cenvat credit based on M/s. Star Professional Services' invoice. The Asstt. Commissioner upheld the demand and penalty, which was affirmed by the Commissioner (Appeals).

The Appellant argues that M/s. Star Professional Services eventually obtained service tax registration and paid the tax, justifying the Cenvat credit claim. They assert that since both M/s. Star Professional Services and Star Security & Employment paid the service tax, denying the credit would result in double taxation. Additionally, they highlight the validity of TR-6 challans in the name of Star Security & Employment, who had service tax registration and discharged the tax liability, supporting their claim for credit.

Conversely, the Department argues that service tax credit can only be claimed if the tax has been paid, which was not the case when the Appellant took the credit. They contend that the Appellant failed to verify the tax payment status before claiming the credit, indicating awareness of M/s. Star Professional Services' non-compliance. The Department maintains that subsequent registration and tax payment by M/s. Star Professional Services do not rectify the initial irregularity, warranting denial of the Cenvat credit.

The judgment acknowledges the absence of service tax registration and payment by M/s. Star Professional Services when the credit was claimed. However, it notes that M/s. Star Security & Employment, under the same management, provided the services and discharged the tax liability, supported by valid TR-6 challans. The judge finds that the subsequent registration and tax payment by M/s. Star Professional Services, in response to the Department's objection, validate the credit claim. Consequently, the impugned order confirming the demand and penalty is deemed unsustainable and set aside, allowing the appeal in favor of the Appellant.