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2017 (12) TMI 1210 - AT - Service TaxCENVAT credit - job-work - Rule 6 of the CCR, 2004 - inputs/input services used for providing taxable and exempted output services - non-maintenance of separate records - Held that - it is not in dispute that the activities undertaken by M/s IHT & IHC were in respect of goods on which the principal manufacturers were paying duty. It is the accepted fact of the show cause notice that the principal manufacturers were discharging central excise duty on final products - In terms of Rule 3 of Cenvat Credit rules 2004 the job-worker is eligible to avail credit of tax paid on input and input services where the jobwork is undertaken in terms of N/N. 214/86 CE dt. 25.03.1986 i.e when the principal manufacturer is discharging duty on final products. The Appellants have correctly availed the cenvat credit used in job-work activity and the bar of Rule 6 of the CCR, 2004 would not apply - appeal allowed - decided in favor of assessee.
Issues involved:
Appeal against demands and penalties related to job-work services under Business Auxiliary Services category, exemption under Notification No.8/2005 ST, maintenance of separate accounts for taxable and exempted services, applicability of Cenvat Credit Rules, eligibility for credit of input and input services in job-work activities, dispute regarding Rule 6 of Cenvat Credit Rules. Analysis: The appeals involved the issue of demands and penalties imposed on M/s Industrial Heat Treaters (IHT) and Induction Hardening Company (IHC) for providing job-work services under the Business Auxiliary Services category. The companies had taken registration and were doing job work on goods received from both registered and unregistered clients. The main contention was regarding availing exemption under Notification No.8/2005 ST for clients registered under central excise and paying service tax for unregistered clients. The companies were accused of not maintaining separate accounts as required by Rule 6(2) of CCR, 2004 and not reversing the proportional amount of cenvat credit availed on input and input services, leading to demands, penalties, and interest. The Commissioner (Appeals) had upheld the adjudication orders, except for dropping the demand and penalty for IHC for the extended period. Both companies and the Revenue had filed appeals against the decisions. The Tribunal observed that the job-work activities undertaken by IHT and IHC were on goods for which the principal manufacturers were paying duty, making them eligible to avail credit of tax paid on input and input services. The exemption under Notification 8/2005-ST was available only when the job-work was done on goods on which central excise duty was paid by the principal manufacturer. The Tribunal referred to relevant case laws like Sterlite Industries Ltd., Western Indian Forging P. Ltd, and MPI Paper Pvt. Ltd to support their finding that the companies were eligible for credit of input and input services used in job-work activities. As per Rule 3 of CCR, 2004, the companies could use cenvatable inputs in processing goods on which the principal manufacturer paid duty, making Rule 6 of CENVAT Credit Rules inapplicable in this case. Therefore, the demands and penalties against the companies were deemed unsustainable. In light of the above observations and findings, the Tribunal set aside the impugned orders and allowed the appeals of the assessee with consequential reliefs, if any. The appeal filed by the Revenue was also dismissed based on the Tribunal's findings. The judgment was pronounced in court on 07.12.2017.
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