2017 (3) TMI 519 - AT - Service Tax

CENVAT credit - Job-work - though the job work activity was exempt under N/N. 8/2005-ST dated 01.03.2005, Job workder paid the service tax - principal have availed credit on the strength of such job bills. - Held that - when the supplier has paid duty and issued valid invoices, the appellant is eligible to take credit, moreover, the issue herein is a revenue neutral situation - similar issue decided in the case of NIKITA TRANSPHASE ADDUCTS PVT. LTD. Versus COMMR. OF C. EX., THANE-II 2006 (10) TMI 358 - CESTAT, MUMBAI - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility of the appellant to take CENVAT Credit on the impugned goods.
2. Recovery of irregularly availed CENVAT credit by the appellant.

Analysis:
1. Eligibility of the appellant to take CENVAT Credit on the impugned goods:
The appellant, a provider of output services, sent raw materials to job workers for processing. The job workers charged service tax on the processing service, which was exempted under Notification No.8/2005-ST. Investigations revealed that one job worker collected service tax but did not remit it to the government. The appellant availed CENVAT credit on the service tax paid by the job workers. The Additional Commissioner initially dropped proceedings but later held the appellant enriched by unjust enrichment of CENVAT credit. However, various judgments, including Tribunal and Apex Court decisions, established that the credit cannot be denied at the receiver's end if the supplier has paid duty and issued valid invoices. The issue was deemed a revenue-neutral situation, and the appellant was deemed eligible to take credit. The appeal was allowed, setting aside the impugned order.

2. Recovery of irregularly availed CENVAT credit by the appellant:
The investigations revealed that the appellant irregularly availed CENVAT credit on the service tax amounting to ?13,35,939. The authorities sought recovery under Rule 14 of CENVAT Credit Rules, 2004, and relevant provisions of the Finance Act, 1994. The Additional Commissioner disallowed the credit and imposed penalties and interest. However, the appellant successfully argued that the issue was settled in their favor by various judgments, and the credit could not be denied when the supplier had paid duty and issued valid invoices. The appellant's eligibility to take credit was upheld, and the recovery of irregularly availed credit was deemed unjustified. The impugned order was set aside, and the appeal was allowed.

This comprehensive analysis of the judgment highlights the issues involved, the legal arguments presented, and the final decision rendered by the Appellate Tribunal CESTAT KOLKATA.