2023 (10) TMI 673 - AT - Central Excise

CENVAT Credit of service tax paid by the job workers - denial on the ground that the job worker should not have paid the service tax - exemption under N/N. 08/2005-ST and 25/2012-ST - whether the job worker has option to pay the service tax or compulsorily avail the exemption Notification No 08/2005 and 25/2012? HELD THAT - In terms of subsection (1A) of Section 5A of CEA for the purpose of central excise if an exemption is granted absolutely the manufacturer of excisable goods shall not have option to pay excise duty whereas the Notification necessarily to be availed by the assesse. Unlike sub section (1A) of Section 5A, there is no provision in the Finance Act, 1994 to compulsorily avail the exemption granted absolutely. Therefore, Notification No. 08/2005-ST and 25/2012-ST even though they grant absolute exemption but in absence of provision such as Sub section (1A) of Section 5A of Finance Act, 1994 the assessee has option either to pay service tax or to avail the exemption. When the job worker has paid the tax without availing the exemption Notification there is no illegality in payment of such service tax. If this be so, then the service recipient, in the present case, the appellant are legally entitled to avail the cenvat credit as there is no dispute that the input services is directly used in or in relation to manufacture of their final product. There are nothing illegal or wrong on the part of the appellant in availing the cenvat credit on the input services provided by the job worker to the appellant - the impugned order is not sustainable - appeal allowed.

Summary

Issues involved: Denial of cenvat credit of service tax paid by job workers on the ground of exemption under Notification No 08/2005-ST and 25/2012-ST.

Summary:
The appellant contended that the job workers paid service tax on input services without availing the applicable exemption. They argued that the assessment of service tax by job workers cannot be reopened by the department, and therefore, cenvat credit cannot be denied. They highlighted previous cases where similar issues were resolved in favor of the appellant. The Revenue reiterated the findings of the impugned order, denying cenvat credit based on the exemption notifications.

Upon review, the Tribunal found that the job worker's payment of service tax was not exempted under the mentioned notifications. They referred to Section 83 of the Finance Act, 1994, which applies certain provisions of the Central Excise Act to service tax matters. The Tribunal analyzed the provisions of Section 5A under Section 83, emphasizing that unlike central excise duty exemptions, there is no compulsory requirement to avail service tax exemptions. Therefore, the job worker had the option to pay the tax or avail the exemption, and their payment of service tax without exemption was not illegal.

Additionally, the Tribunal noted that if the jurisdictional officer of the service provider did not question the payment of service tax, the cenvat credit availed by the service recipient cannot be challenged. Consequently, the Tribunal concluded that the appellant was entitled to cenvat credit as the input services were directly used in the manufacture of their final product. The impugned order was set aside, and the appeal was allowed.